To Pay Or Not to Pay: When to Move Beyond Free

via WebWorkerDaily by Aliza Sherman on 4/29/09

Written by Aliza Sherman.

walletThe other day I noticed that someone had posted a quick poll on LinkedIn. I thought a poll like that might be a good tool to use for informal market research, so I clicked on the link to create my own. However, I was met with a message saying that I needed to upgrade my account to access the polling feature. I perused the prices, then quickly determined I wasn't going to upgrade.

This isn't the first time I've considered upgrading my LinkedIn account and decided against it, which led me to start thinking about all of the "freemium" apps — basically free apps with premium upgrades — I've been using. I started feeling guilty about taking advantage of the "free" in freemium services, especially because I've had the opportunity to interview founders of these companies, many of whom confess to struggling over pricing. So what makes us decide to pay for an app?

My decision process works something like this:

1. Is it mission critical? Not every app or tool I use is critical to the well-being of my company, but some are. Our project management system? Critical. Our internal social networking system? Not so critical, because we've not all adopted it yet, but this could change.

2. How useful is the free version? In my WWD review, I was impressed that Deskaway's free version had more features than Basecamp's. That could have won me over, but its interface just didn't work for me.

3. Can I live without more functionality? I used Basecamp for quite a while without ever thinking about the reporting available with a paid plan. I was getting my reports from Freshbooks, and Basecamp was just a way for me to manage client information when I was working solo. I only upgraded to the $24 per month plan when I needed to manage more projects. Payment made sense because I had so much more new work to cover the expense.

4. Should I upgrade and pay or seek out a different app? Once I began adding more team members to my company, Basecamp's inadequacies for deeper project management became obvious. So instead of upgrading a notch or two further — and still not having the functionality we needed — we moved over to 5pm at $4/month more. Again, the cost was palatable because more team members meant greater productivity and more moving parts to manage, so it made good business sense.

5. Do the fee levels hit my sweet spot? I realize I have two tiers of apps that I am willing to pay for, each with its own sweet spot in terms of pricing. For apps that benefit the overall smooth functioning of my business and provide real value that I can quantify, I'll pay around $25 per month. I feel comfortable having four of these. The second tier contains apps that are useful in some aspect of my work, and I'll subscribe to up to five of these at $10 per month. That's about my limit. Right now, I don't have a real method for deciding how much I will pay — it's all from the gut. But we're working to measure the costs of doing business and the impact our apps have on our bottom line, so eventually I should have some real numbers to work with.

6. How entrenched am I? In some cases, I begin to feel "trapped" by the choice I made initially when I started with an app. If I need to upgrade and the next level is out of my price range, what then? When I left Basecamp, I couldn't easily figure out how to migrate information over to 5pm, so I just downgraded my membership to a free plan, and now cannot figure out how to access my data so it just sits there. Over time, those assets will be outdated and no longer as valuable as they were the first months of the migration, but I still feel a sense of my data being trapped. Avoiding this trapped feeling — as well as avoiding a huge learning curve of a new app — are two big factors when deciding whether to move to another service.

7. Can I afford not to pay? If an app I'm using has a positive effect on my business' bottom line–or moving away from it has a significant negative impact–then I'm much more likely to dish out the cash.

Back to the case of LinkedIn. The lowest monthly upgrade is $24.95. Per month. For me, that hits a sour note. I get so much benefit out of LinkedIn at the free level and have for years that there is no incentive for me to pay. Just missing out on that Quick Poll feature isn't enough to entice me over to a paid plan.

All LinkedIn could do right now to win my paying business — possibly — is to remove the free level altogether. But by doing that, their entire business foundation would crumble as many people migrate quickly away.

How do you decide whether an app is worth paying for? Which services do you consider well worth paying for?

Image by stock.xchng user jana_koll