The New York Times reviewed a few productivity applications for iPhone. One of their recommendation is reQall. This review says,
My favorite stand-alone organizational app is reQall, which David Pogue has already praised in The Times. ReQall really does turn your iPhone into a personal assistant — you dictate all your to-dos, reminders, appointments and other ephemera, and it translates your commands into actionable tasks.
A great review that clearly conveys value to customers. But the very next line goes on to destroy that value,
(I find the free version good enough, but heavy users might want to invest in the $25-a-year Pro version.)
Clearly the application was a superior option but as the review says their free version is good enough for a vast majority of users. I am not faulting the review but rather the way ReQall versions are designed. By offering a good enough free version most customers end up choosing that version even though they might have chosen the paid version.
I have written several posts on multi-version pricing– which is about offering multiple product/service versions at different price points to serve different customer segments. There are many examples of effective usage of multi-version pricing, from CPG leader (Nestle) to a salon. The important design decision in multi-version pricing is the price-feature mix so that customers self-select themselves to the pricing option that ends up maximizing profit to the business.
Mr. Chris Anderson calls this type of multi-version pricing as “freemium” in his new book, “Free: the future of a radical price”. Please do note that multi-version pricing is not new and has been covered extensively in the economics and practiced effectively by many businesses. The freemium model is just an extreme case of multi-version pricing, when one of the version is made free. While offering a free version helps to drive customers to your business, if not done correctly and without analysis of your customer segments it ends up serving the needs of most of your customers thereby destroying the value created.
Do you know your customer segments and what they value?