Set Expectations: Charge Something

1 minute read

Seth Godin has a great post about the pricing model for renting digital movies:

It’s important to charge something, because the act of paying fundamentally changes the dynamics of the relationship. The question is this: at the start, is your goal to maximize profit or to build a platform that scales? The fact is that the market is too small right now for the price to matter. What matters is whether you can build an audience that is in the habit of paying you, an audience that wants to hear from you, an audience that you can build a business on.

I think this speaks volumes to many of the startups I have seen recently. Some startups are so focused on building an audience for free that they aren’t building an audience that they can build a business on. I’ve made this mistake as well.

The problem isn’t offering a free product or trial, it is acquiring an audience during a free period that expects the “free forever” model. This is the audience that can’t make the leap to paying customer, making it hard for your startup to move into revenue generation mode.

It isn’t a bad thing to have a free period to allow the bugs to be worked out. But at some point, your business will require a revenue model and your customers need to expect that. Otherwise, they’ll leave when you move from the free period. And you’ll have to start over.