What is the right time to charge customers?
Let me first tell you about the context:
I am facing an alternative:
Customers are granted some "credits" upon subscription in order to discover our mobile app's benefits. They receive 20 credits once they are registered, then they are granted 5 extra credits each month. That is kind of a free plan if the customer is a casual user of our app.
We just launched and it is quite difficult for us to convince people to use our app. We currently have 3 users:
- one that just registered without doing anything;
- one that register and being able to use the app every day (who consumed 11 credits as well);
- one that just registered and consumed one credit.
I have an incoming feature in order to attract even more customers: sponsorship.
So I thought about granting 2 credits to the sponsor AND the new customer being sponsored so it's a win-win action.
Yet I wonder if this would push me away from receiving my very first payment when any customer, who consumed all their credit, would buy some more.
Here is the alternative: do I wait for any first payment to see if I am able to charge them (and tell that my business may be profitable) or do I release the sponsorship feature as soon as possible?
Thanks for your feedback.
Force payment, if it's not given, engage user and iterate until payments are given.
I done too much free stuff to know its not the best way on so many levels.
Hey Pete, out of curiosity. Could you please share your experience of why you say freemium isn't the best way?
Wasn't actually saying that Freemium isn't ok to use. But Free is very hard without deep pockets and almost unlimited resources.
I was responding more so to the situation that the first customer may not want to pay, which I think the OP was most concerned about. If it's too much struggle to get any money from customer, than it means something else is wrong.
Based on my experience of rolling out a new type of organization app and not providing easy enough usability.
Thanks for your advice!
Actually I already force payment when the user has no credits. I expect my very first customer to pay once he has no more credits.
I just wonder whether I shall make him pay asap or not.
I would have thought yes because if he won't pay then why would next person?
If that fails look at the sponsorship option as backup plan.
If he won't pay, it can mean two things:
The sponsorship plan will help me to get more users for sure. Still, if I do it, I might have to consider active users earning extra credits thanks to sponsorship and thus not paying as much as I want. So I want to wait a bit before launching this sponsorship feature, to see if my only active customer is willing to pay when he has no more credits.
Geoffrey, I’m out of corporate consulting and a painful lesson learned is that corporations have no respect for what they do not pay. Therefore as others have indicated, get the customers paying. Have you communicated with the three users you describe? Why did the one subscribe but do nothing? Is there a design issue present? Is there a barrier that you aren’t seeing that they might reveal? UI is as I’m sure you know a huge issue. Simple and intuitive seem to be the concepts of the day. Also keep in mind that recurring invoicing is better than one-time. Subscription services are your best friend once you get a sufficient population. Well, I’m going to long here. Best of luck and keep at it.
Thanks for your comment Andrew.
What do you actually mean by "corporations have no respect for what they do not pay"? I did this app in order to earn money for sure; plus I saw that there was a true need to satisfy.
I followed your advice by getting in touch with the customer who subscribed without doing anything. As for the UI, it is a huge issue for sure, yet we are working on it every single day.
We thought about doing a recurring invoicing but we wanted to engage a few customers first to see if our app would be useful for them. We just have three users so this is a bit early to tell, I guess.
I might switch to subscription services if we are growing our user database though.
I’ll keep at it!
Ge0,
At times in my business life, in order to get “the foot in the door” with a corporation services would be offered at no cost or below cost. My experience is that if the corporation isn’t paying for a service, it is less likely to get the required support for you to be successful. My adage is that if people respect you, they should respect you with an economic indicator called payment/cash. I’ve done much better by avoiding free offers over the decades.
Actually, I was wondering of the exact meaning of "corporation".
Our app falls into the realm of B2C. Our clients are Amazon Flex deliverers so I don't fully understand what you mean when you say that the corporation isn’t paying for a service.
So how do you convince people to try your product out without a free plan, for instance?
Corporate consulting is the Big 4 consultancies dealing with Fortune 100 sometimes Fortune 200 corporations. Large enterprises require learning their business as part of the price of entry. It takes a long time and a lot of effort to gain their confidence. I have been with start ups that tried to gain entry into their business. You are likely dealing with much smaller businesses. That is not my specialty.
innov8or got there before me, but yesterday is the time to charge for your service. If you don't have a service worth paying for, focus on developing it into one that is.
I have already heard this before, yet I wonder what the philosophy of services such as sentry is, since they always offer a limited / free option. They do not charge for anything.
I think as IndieHackers, we have to consider factors such as time to profitability more so than say something like Amazon.
There are some classic examples of not monetizing and going for a big sell out, e.g. Instagram. But does your solution have such wide ranging reach across verticals? It looks very niche to me.
But certainly if you can find another way to monetize outside of user subs, then map it out clearly and post it here, maybe in isolation for ease of discussion.
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