From Free Product to Charging a Fee: What to Know
Launching a fee for a service that has been free for users is scary. Here’s how to prepare and do it right (or as close as you can.)
It’s a fairly common scenario among startups: launch a free product to test and iterate, and attract as many people as you can. A few years down the road, start charging those customers a fee for the service.
It’s never easy to start charging customers, even if a fee model was always the plan. One can’t avoid the risk that some customers will leave.
Have you ever been the user of a service that started charging you, seemingly out of the blue?
No one likes change, especially when it means you’ll pay for something you used to have for free. It’s even more of a challenge if you’ve used the service for free for multiple years.
The users of my client’s service were about to go through this change.
I had the pleasure of being part of a small task force attempting to predict the results and consequences of my client launching a service fee for the first time.
Here’s what I believe are the most important takeaways from the experience of introducing a fee for a previously free product:
Don’t wait. Launch the fee sooner than you think necessary.
The users who had the service for longest were most irritated about the fee. Their messages were angry, insulted even, and said they’d never recommend the company again. Those ones did in fact churn, and likely won’t be back.
Some of these users had used the product for three full years. That’s a long time to get used to not paying.
The least inflammatory comments and customer support messages came from users who had started with the service more recently, even as much as a year earlier.
In comparing the responses of newer (less annoyed) and older (extremely annoyed) users, I believe that we could have softened the blow if the fee were introduced sooner in the product’s lifetime. Waiting so long only made it more difficult for many users to adjust to paying for something they associated so strongly with ‘free.’
Understand the user types before adding a fee.
This sounds elementary. But teams often come to me because they don’t have a really solid sense of their customer types yet. I don’t think they’re alone. It’s really tricky to launch a fee when we don’t fully understand which customers give the company disproportionate value, and which ones we can actually let go without much harm.
When the fee was launched, the team’s lack of knowledge about the user types meant we had to play catch-up, fast: I dug through Facebook comments, customer support messages and user data trying to piece together profiles of these users on the fly. We needed to understand who was churning, and how much it would hurt.
We got lucky: many users remained loyal, and even publicly defended the company’s need to earn revenue to pay its hard-working employees. But some of those longest term users did leave. They were possibly the ones worth two or three or ten times as much because they recommended the service to many others. This is still something we can’t fully quantify, and measure the impact of.
Use qualitative input to prep the Customer Success team.
It’s tempting to focus on quantitative input in assessing the risk of launching a service fee. The quant side certainly helps estimate how many customers you risk losing, and whether you can acquire new users to cover the loss.
But qualitative input will help your team prepare for existing users’ questions and confrontations regarding the fee.
If you avoid speaking with current users, you can’t gauge the emotional responses to a fee. You won’t (1) understand their perspective on how it will impact them in order to find the best communication, nor (2) prepare your customer support team by collecting the questions users will ask.
Without qualitative input from customers, the customer support team and management will likely be scrambling to respond to users one at a time, with little ability to anticipate the topics that arise.
Prepare for hate mail, and prepare a human response.
There will always be people angered by the introduction of a fee for the service they’ve used for years without paying for.
Even in the best case where users feel strongly bonded with the service, some users may express a feeling of insult when their beloved brand starts - from their perspective - “prioritising finances over their customers.” People are quick to change sides when they feel a company no longer has their best interest in mind.
Teams are often afraid of letting the news out too early, fearful that a ‘leak’ from a tester would drive hate mail before a fee is publicly announced.
I’ve seen that the results of avoiding customer input are worse. Strong user reactions will likely happen anyway, but the team can respond much better if they interview select users ahead of time, understand their feelings, and take time to prepare a considerate response.
Add something, anything, so the user sees added value.
One question from existing users comes up a lot in my experience: “What are you adding for the amount I’m paying every month now?”
It’s tough to rationalize that anyone should start paying for the exact thing they’ve had for free.
In my experience with a client a few years ago, some of their users shared on Facebook groups that they tried to convince themselves to stick with the service: they believed in the company’s values and that the service had been a big help to them. But paying for what had been free made them feel too much like “fools,” they said.
With hints of upcoming product improvements in some comments, the mood lightened and many users became more positive. Compared to the idea of paying for zero product enhancements, the potential for product upgrades seemed to change the minds of some.
No one wants to feel like a fool for paying for the same “free” product. Giving them something to pay for can help users convince themselves that there’s a win for them, too.
Expect users to change behaviour within your service
If charging users depends on any specific usage (using a specific tool, doing a task more than 2x per day), you will see drop-off, and usage patterns will change as users find workarounds.
With each client I’ve had this experience with, some of the things we thought we knew concretely about usage patterns have shifted in a noteworthy way, potentially impacting anything from revenue estimates to how we will design in the future.
The lessons from such a big shift are many, though these ones rose to the forefront as I tried to reflect and share what we could have done better with multiple teams. The overall launch of the service fee for one recent client was considered a success, but there’s always room for improvement.
Hopefully these lessons can help anyone — on the research side or business side — on the journey to charging for your service, and better serving your customers at the same time.