To charge or not to charge your customers – that’s the question

Every time I open my free apps like LinkedIn or YouTube, they nudge me to upgrade to their premium services. I diligently ignore their offers of boosting my profile by 4X or listening to music ad-free.

While I do use these platforms actively, I hesitate to use their premium services. Why should I pay when most of what I need is available for free? I'm sure there are many customers like me across the globe who prefer freemium over premium.

So, the real question for startups is: When should I start charging? Should it be from the start, or should I wait for the network to build and find insights before I start charging customers?

Let’s go through few examples, wherein, startups started without charging, later pivoted towards premium services and struggled.

1. WhatsApp: Initially free messaging, encountered resistance when exploring monetization through business accounts.
2. Twitter: Offered free microblogging but met challenges when introducing ads and sponsored content.
3. LinkedIn: Started with free networking, faced resistance in convincing users to upgrade to premium accounts.
4. Spotify: Offered free music streaming with ads, struggled to convert users to paid subscriptions.
5. Quora: Started with free Q&A, faced challenges in convincing users to pay for premium content or features.
6. Dropbox: Provided free cloud storage, faced difficulties in converting users to paid plans for more storage or features.

Examples of startups that started by charging for their services and became successful:

1. Netflix: Started with subscription-based DVD rentals, now a leading streaming platform with original content.
2. Amazon: Began as an online bookstore with paid transactions, evolved into the world's largest e-commerce platform.
3. Adobe: Started with paid software like Photoshop, now offers a suite of creative tools on subscription.
4. Zoom: Initially charged for video conferencing services, became essential during remote work and virtual meetings.
5. HubSpot: Initially charged for marketing automation software, now provides a suite of inbound marketing and sales tools.
6. Airbnb: Initially charged for accommodation bookings, now a global platform for short-term rentals and experiences.

Here are examples of startups that started by offering their services for free and later became successful through paid models:

1. Trello: Initially offered a free task management tool, later introduced premium features and subscription plans for advanced users and teams.
2. Mailchimp: Started with a free email marketing service for small businesses, expanded to offer paid plans with advanced features and automation tools.
3. Grammarly: Started with a free grammar and spell-checking browser extension, later introduced premium plans offering advanced writing suggestions, plagiarism detection, and style enhancements.
4. Canva: Started with a free graphic design platform, later introduced premium plans offering additional design elements, collaboration features, and advanced exporting options.
5. Calendly: Initially offered a free scheduling tool for individuals, later introduced premium plans with advanced scheduling features, customization options, and integrations for businesses.
6. Evernote: Started with a free note-taking app, later introduced premium plans with additional storage, offline access, and advanced organization features.

So, which means that there is no straight line for charging the customers but in the end, we know it’s critical to monetize your solutions. So, if you have a gameplan of getting paid customers great but if you are still not sure it’s important to take a step back and relook at your proposition.

When to Start Charging Customers:

1. You're Solving a Big Problem: If your product or service solves a significant problem for people, it's a good sign that they might be willing to pay for it.
2. You Need Money to Grow: Charging customers early on helps bring in money to grow your business. You can use that money to make your product better and reach more people.
3. Feedback from Serious Users: When people pay for your product, they're usually more serious about using it. Their feedback can be really helpful for making your product even better.
4. It Makes Your Business Look Good: Charging for your product shows that it's valuable. People might take your business more seriously if they see you're charging for what you offer.

When Not to Charge Customers:

1. Testing the Waters: Sometimes, it's smart to offer your product for free at first to see if people like it. It's like giving them a taste to see if they're interested.
2. Getting Lots of Users: If you're just starting out and want to get lots of people using your product, offering it for free can help spread the word faster.
3. Standing Out: If everyone else in your market is charging for a similar product, offering yours for free can make you stand out. It's like saying, "Hey, come try us out for free!"
4. Still Figuring Things Out: If your product isn't fully ready or is missing some features, giving it away for free lets you get feedback while you figure things out.

It all comes down to what you're aiming for and where your business stands. But here's the key point: you won't truly know how your product is doing until someone pays for it.

To reiterate, free customers might give feedback, but it's often just niceties; paying customers, on the other hand, are invested—they'll tell you what's working and what's not.

So, if you're planning to tweak and enhance your solution to make it work, it's crucial to get paying customers onboard—even if it's just ten of them. Charge them a reasonable fee, gather their powerful insights, and use them to shape your product into something that really works.