Free Trial Business Model

August 4, 2009

Our discussion on subscription models is a battle that has been had since media chose the internet as a distribution tool. Time cannot distinguish a surefire success of a business model as the factors of advancements in technology, consumer behavior and many others will cause any business distributing through these medias to have to continue to evolve. When discussing the factors that decide how a business will make money, it is important to remember that the business cannot define a wrong or a right model, only the consumer can do this by using, paying, or a little of both. The only thing a business can do is give the consumer something to define the value they place on that companies content, goods, or services. This customer-defined business model is the “free trial converted to subscription” model, and may be the most stabile of business models on the net. Two reasons why a business needs to explore this model:
BaseCamp, Netflix, Adobe, Playboy and the Wall Street Journal as well as thousands of other companies used this model to some extent because they care about how you feel. When I first bought my Mac I used a free trial of Apples’ MobileMe product which at the time was only email, online storage and web hosting through other Apple software. The key to that experience which converted me to a paying customer for the past four years is how it made me feel. I felt more efficient with my time, more organized with my data and that I was now able to create and host a website with no experience in that field made me feel smart. I was in search of those feelings, MobileMe gave them to me and Apple continues to reap the benefits. Emotional connections is one of the key experiences consumers must have with a product or company to convert them to a subscription holder.
The second positive experience consumers have to have is not directly with your product, but with the site you distribute from. According to Joseph-Vaidyan (2008), poor web design can create distrust in your company, a brand, or a product before an individual has even had an interaction with the product (pg. 5). I personally place a huge value on the UW Libraries content and the information it grants me access to as a student, but their site is difficult and confusing. It is not about the colors, shapes and tools, but something as simple as navigation can push a customer away. Outside of being a student I would have a hard time paying for such a service because my trial experience would be full of searching the wrong databases and stumbling upon my results rather than easily finding the right database and executing searches that bring me desired results.
Other business models can be more successful though given the right circumstances and one should not default to the free trial method. A business I have started for example provides neighborhood businesses with an avenue to advertise online to people who reside in the neighborhoods their business serves. Businesses have a tiered pricing structure which gives them the most visibility by subscribing to our middle price point and the initial reviews by mom-and-pop shops is outstanding! Our fee is so minimal in comparison to the other advertising avenues they have had easy access to in the past that it feels practically free to them, so to actually give them a trial is giving revenue away for us. It is the same basic idea as to why Walmart does not have a card program like many other grocers in our neighborhoods, “Why give them more rewards with the base price is better than if you have the benefit of a card at another grocer.”
Online distribution will never allow a guaranteed business model because of how all of the pieces evolve over such a short period of time. Even Googles advertising model will not carry its growth or hopes forever and that is why you see them attacking mobile and desktop computing. A business will never reach its’ full potential when it places all of its’ eggs in one basket, or all in to one business model. The fact of the matter is that diversification is revenue streams is what will allow a business to collect the data necessary to see which business model has the greatest ROI and growth. Trials and free will bring consumers in to experience what you have to offer – if it is vital you collect something back quickly, open to advertisers while the look around. When they subscribe, give them a defined value over your free service with content that is not able to be found anywhere else such as in blogs from you best writers or tools that make their lives easier. Commit to the consumer from day one, that your product will always be focused towards them and their needs, and by day 30 or 60 they will see your commitment, feel good about it, appreciate it, and make a financial commitment back to you.

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