When will the "free edition" work?

After writing the previous post regarding the "free edition" option, I felt there was some injustice about it. The bottom line was that it's practically impossible to get anything useful from having a "free edition" and that's not true. It does work in some cases. I wanted to explore these specific situations.

First, one of my main arguments was that it is a different product, aimed at a different market segment, so it will need it's own marketing efforts and it will not contribute to the marketing efforts of the main product. This claim is based mostly on the concepts described in Geoffrey Moore's "Crossing the Chasm". While I do think this is a great book, I also think that: (a) like most rules, there are exceptions and (b) the internet has changed the market. Especially evident is the long tail effects on the web as a consumer market.

Second, one may argue whether this is a different market segment to begin with. Well, there's no definite answer. In my opinion, it mostly depends on how you distinguish between your editions. For example, a CRM product with a free edition that handles up to 50 clients is probably targeted at a different segment. A photo site that offers extra space for subscription fee is probably targeting the same segment. If you are heading towards the same market segment, then your marketing efforts are joint, you stay focused on your market and it is more likely that you will see contribution to your overall sales.

Another point which I neglected in the previous post is web applications "free edition". Although I focused my research on classic software products, it's not very different when it comes to web applications. I think the key point to remember is that you will have much more users for the "free edition", thus, you will need more servers and bandwidth.  As with classic software, providing a poor service (e.g. slower servers) to your free edition users will have a counter effect, so plan accordingly. And, reiterating the point, if this is a different market segment, this is exactly what "diffusing your focus" means.

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Comments

[Boris Freidberg]

Hi,
When, I think about free edition, I try to find answers for two main question.
1. What's benefits I will get from the free edition?
2. How, I earn real money from free edition?

Example of answer for the questions:
1. My software will report problems and usage events to my server.
2. Advertising, pre and post execution promotions of Coca-Cola, and on screen banner with premium edition promotion.

[Zviki]

I believe the cases you mentioned does not really fall into the category of "free edition". A "free edition" would support the sales of your commercial editions, and, thus, your business model is selling licenses to your full product. In the cases above, the business model is different. It's no longer a "free edition", it is now adware or spyware. While these are legitimate (or semi-legitimate) business models, I did not cover them it these posts. Maybe I'll touch them in the future.

Thank you.

Zviki

[Itai Frenkel]

Shalom Zviki,

While there is place for market segmentation , developers are changing positions and changing jobs along their career, and they "jump" from one market to another (taking their coding habbits and tools whether they go).

Nevertheless, you still want to attract them, so once they are in the position to buy your tool, they will choose it over the competition.

If you are targeting developers when they are students, then offer a University edition (for University labs) and a free Student Version (for doing assignments at home). If you are targeting developers when they are coding for fun, then offer them a Personal Edition for 20$. If you are targeting One-Man-Show Buinesses then offer a Professional Edition for 80$. If you are targeting Enterprises then offer a special price for bundles of 10 and above (500$).

It could still be the same product, with the same QA, and with the same user community. Just tailor the features to the "life-cycle" of the developer. Students do not need CVS and backups, while One-Man-Show Businesses do not need collaboration features.

Either way, always match your offer to your target auience. Do not be afraid to charge money for your work, and for god sake do not offer crippleware.

You would need the money to hire people that would give technical support for your customers (BTW, selling 10 copies might mean 10 times more support calls). If you do not have enough technical support resources , you would have to do it yourself which would come on the expense of R&D.

Regards,
Itai

[Zviki]

Thanks, Itai.

A couple of things to consider:

Time-line. As a starting business, time is of the essence. A student graduates in 2 years (average) and gets a job as an NCG (pretty much like internship). How long will it be before this person will have an actual affect on the company buying decisions? Can you survive that term? For well established companies, this is a good tool. For startups, I'm not sure.

Of course, this doesn't matter if you don't put an effort into it. But my point is that you do. It's a different product which requires packaging, marketing and support (sometimes even minor development and some QA). And, the worse thing, it diffuses your focus from your main market.

I think the focus is a key concept that many starting entrepreneurs fail to grasp. The biggest challenge is to be approached by a customer with his check-book ready and say "no". I really recommend "Crossing the Chasm" in this context. It's an eye-opener.

[Ear Money From Home]

Great Blog some interesting stuff! I always like using free stuff