Stop Giving Stuff Away for Free
Almost 20 years ago, I was part of a company that was very early in the birth of online backup and ultimately the beginnings of the Software-as-a-Service business model.
I remember that VCs didn’t want to fund a start-up with a recurring revenue business model. They kept pushing us to sell software (once) like everyone else did.
Today, you’d have a very hard time finding a VC to fund your startup that wanted to sell software as a one time software purchase. They’re only interested in SaaS today.
It turns out that customers had many of the same concerns — not only were we selling a different technical solution, we were selling a different pricing model. It was new to them. For most of them, the solution we were proposing was both better and less expensive. But, it represented change.
We faced a dillema that many companies face today — how to get a customer to buy something that really is different than what they’re doing today.
We tried a bunch of things. We put more pressure on sales people. That didn’t work. We hired more senior sales people. That didn’t work. We paid for more marketing. That got more leads, but no more deals.
Without many options, what did we do next?
We tried giving it away with free trials. This felt good. We got a bunch of agent downloads (our technology required software installed on each server we protected). We even got a few people to backup a few things. But, we got almost no deals.
We then tried something else that changed everything.
We priced and sold our service as planned, but we made it risk-free. We offered 30 to 90 day no-risk periods. If something didn’t work or they weren’t happy, they didn’t pay for any of it. If they were happy and kept using it, we billed them (after the risk-free period was over) as if they were on a regular contract from the beginning.
Why did this work? We overcame the real issue — risk. They didn’t need a free solution. They didn’t mind paying for something that added value. But, they wanted to know that we’d take the risk with them. They wanted to know that we believed in what we were selling.
What’s the moral of this story?
If you project confidence in your product — that it works, that it’ll work for them— and put your money where you mouth is (skin-in-the-game) — your customers will believe you. If you let them use it for free, they’ll believe isn’t valuable, that you don’t believe in it and that you aren’t sure if it’ll work for them.