Have you been giving your product away for free and now want to charge for it? Afraid of backlash from your users? Wonder what would make your freeloaders fork over $4.99 a month without complaining about it in twitter?
I have been recommending businesses to focus on the reference price. That is the price customers have been trained to pay and expect to pay for a product. Any increase from that reference price will be perceived as a pain by the customer and any decrease as a deal.
The reference price problem is severe when the price is frozen at $0, that is you have been giving away your product for free. Changing the price of a pint of ice-cream from $2.99 to $3.49 is difficult but not as difficult as charging $2.99 per week for access to your free online content. The latter is several orders of magnitude more difficult than the former.
Difficult does not mean impossible. You can indeed successfully move reference price in the minds of customers from $0. One such way is using choices, specifically premium priced choices as seen in this research,
Reference price solution alone does not address the free to fee problem says Uri Simonsohn, professor of marketing at Wharton School. According to him the second dimension is – It is the category problem.
Imagine, for Thanksgiving, you go to your parents’ for dinner and after a nice dinner they say, ‘That’s going to be $10 per person’.
You would be upset.
We expect this category of products to be free like mom’s love is.
If we come to expect a product to be in “forever free” category then reference price is not going to cut it. Moving from free to fee for this category is like charging for mom’s love.
Is there a solution?
Yes – product positioning shift combined with reference price.
Think of your product as something your customers hire to fill a need. You have an active role to play in telling your customers what job you want them to hire your product for. That is product positioning. When users have come to perceive your product in the forever free category you have a positioning problem. Somehow you have lost control of positioning and let them decide what job they want to hire your product for.
The way to shift that is to change the job – telling your customers what new job you want your product to be hired for. That is serving new jobs of customers (should we call them customers if they are not paying?) you already have.
This may require minor product changes – pivots- but the key is your deliberate action to take complete control of product positioning and telling customers which new jobs your products will serve.
Hopefully you will choose new jobs that they are used to paying for and not yet another mom’s love type jobs.
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