Nagging brings in money

If you think nagging is something new, think again. That was my point in this short post from January 2012.

Nagging and upgrades

It takes both carrot and stick to get people to upgrade, and that’s been known for a long time.

Freemium and nagging mean giving people a useful product free or cheaply while making paying for more attractive. I use the model in both SPAMfighter and Amino. But at a museum in Sydney, I spot an old version of the same thinking: First, second and third class on a train.

I’m at the Powerhouse Museum with the family in January 2012. It’s like a big Experimentarium, where children can run around trying lots of things. But what I want to show here is a business model I find enormously interesting.

Freemium and nagging in SPAMfighter

Take SPAMfighter. You can download a free product that works well and is perfectly usable. In return, you live with adverts in your email client and outgoing emails, plus some limitations. Paying gives you more options and removes some of the irritation.

The irritating things are what I call nagging. You add them deliberately. The limitation doesn’t necessarily mean the feature costs us more to provide.

I use the example of limiting how many email addresses you can put on a whitelist or blacklist. Giving users more wouldn’t cost us a penny. But we’ve introduced the limit to give people a reason to pay.

So there are drawbacks to the free version and benefits to upgrading: No adverts, more options with the lists and other features. It’s a classic model.

Amino also gives a lot free and more to those who pay

On Amino, you can ask questions and use lots of things for free. Amino Plus gives you more benefits. In the video, I mention the price at the time of DKK 99 a month and, among other things, a larger signature that can bring more visitors to your website.

I also mention the option to bid on ten jobs on Amino Freelancer and access to entrepreneur interviews. Those are the examples and terms I describe back then.

My point is that several of the extras wouldn’t cost us much more to give everyone free. But if we gave them to everyone, fewer people would have a reason to pay. So we hold something back for paying members.

We give something free that makes lots of people happy. They don’t have to decide whether to pay before trying the product. At the same time, we give the most dedicated a reason to upgrade. That way, the whole thing can pay its way, with room for both free users and paying customers.

First class: Plenty of space and shelter from the wind

At the museum, I show an old railway carriage. First class looks comfortable. There’s plenty of room, windows and doors. You can sit comfortably without the wind blowing straight into your face.

I also note, a little ironically, that you’re sitting with other fine people. There are several advantages to the expensive ticket, and I compare those with an upgrade in a modern business model.

Second class: Soft seats become wooden benches

Then I move down to second class. There’s less room, and soft seats have been replaced by hard wooden benches. I ask: Would giving people something soft to sit on really cost that much more?

My interpretation is that this is nagging too. You make the cheaper version less comfortable so some people want to pay for comfort. I know the railway company saves money by cramming more people together. That’s a real saving. But I use the hard seats as an example of a deliberate difference in experience.

Third class: You don’t control the wind

I compare third class with a cattle wagon. There’s room for lots of people and no glass in the windows. If it’s cold, the wind hits you in the face. If it’s hot, the breeze can be nice, but you can’t decide for yourself.

In a better class, you can open and close the window. Here, I again ask what putting glass in would have cost. My explanation in the video is that the uncomfortable difference can persuade people to upgrade. That’s my reading of the displayed carriage, not a study of the railway company’s historical accounts or decisions.

The old train, which I call a Harry Potter train, reminds me that the idea of starting people cheaply and selling them up through several levels is far older than the internet. That’s how I use it as an illustration.

Look at your own model

Look at your own business. Could you start people free or with a product that’s easy and cheap to begin with? And could you combine some limitations with clear benefits to paying more?

The free product still needs to work and give people something they like. But as some become more dedicated, there may be a next step in the value chain they’re willing to pay for. That’s the model I think is good business. Also read E-pusher about selling and marketing online.

Best wishes, Martin

My original reference from 2012 was to an interview with Charlotte Jorst of Skagen Design about selling 3 million watches a year.

The interview link couldn’t be opened during the review. The original address was http://www.amino.dk/tv/charlotte-jorst-skagen-design.