Are you doing too much and getting paid too little (for your design service)?
Today I want to talk to you about a pricing strategy called ‘free-mium’,
I want to show you what it is, how it works, and how it can prevent you from giving your time, effort, and ideas away for free!.. or so that you can compete with those Designers who are!
Okay, so let’s start with the basics, what is a ‘freemium’ pricing strategy?
What is freemium pricing?
Freemium, (as you may have guessed) is a combination of the words ‘free’ and ‘premium’, and it’s used to describe a pricing strategy that offers at least two different versions of a service – a FREE version and a PREMIUM (paid) version.
The idea behind the strategy is simple, different Clients have different interests and therefore different ideas about how much they should pay for a service.
The freemium pricing strategy provides an opportunity to address these different interests… and therefore win more clients.
How does it work?
The free version of the service addresses the interests of those clients who aren’t yet ready to make a financial commitment but are interested in working with you.
While the paid version addresses the interests of those Clients who already value your service and are prepared to make a financial commitment to you.
This may sound strange so let’s look at an example to see how the freemium pricing model works.
(Note: To help you with your pricing strategy we’ve developed a free Fee Proposal Mini-Series)
For example, are you familiar with the online music streaming company called Spotify?
Spotify currently implements a freemium pricing model by offering all of its customers two service plan options: The FREE version and the PAID version.
The primary difference between the two service plan options is easy to see:
Those customers who choose the free service plan are exposed to online advertising.
While those customers who choose the paid service plan are not!
Now… you may be thinking, ‘why would anyone pay for a service that can be experienced for free?’.
According to statistics published by CNBC (“Apple Music has reportedly passed Spotify in paid subscribers in the US”, Kif Leswing, 4/5/19), 96 million of Spotify’s 207 million users are currently paying customers.
This means that nearly 50 percent of Spotify’s customers are declining the free service plan, in favor of the paid service plan option.
Because different customers value different things!
Yes, that’s right… while some customers value listening to music (free of charge), others value an uninterrupted listening experience.
By offering two different service plan options Spotify can address the interests of a broader range of Client types and thus serve more Clients.
How can Design Professionals avoid giving away free design services?
If you’re thinking that the freemium pricing model only works for tech companies who can simply turn software features on-and-off, then you’d be wrong!
Over the last 10 years, we’ve helped many Architects and Design Professionals develop their own freemium pricing model, with great success.
To explain how we create the service plan options we must first consider the Clients requirements.
For example, when the Client first approaches you about their project, they’ll have many questions.
So why not version the way in which you provide answers to those question, for example, you could offer any of the following combinations of services:
Each type of response will require a different level of commitment from you (in terms of time and resources).
Some services will require a simple meeting and general advice, while others will require a review of the local planning/zoning codes and a written report.
By grouping the services and offering options, you’ll be able to address the interests of a broader group of Client types… from those who just want to meet-and-greet, to those who are ready to receive project-specific advice and guidance.
Of course, if you want to sweeten the deal you can always credit the cost of paid services towards the costs of a future commission… it’s your choice to make!
Why do service options help avoid free design services?
When executed correctly, you’ll be amazed at the number of Clients who are prepared to pay for pre-design services, not just because they’ve been given the opportunity to do so, but because they can see the value (the many benefits) associated with the paid service option.
Meanwhile, those Clients who aren’t yet ready to make a financial commitment can still engage with you through your free pre-design service option.
Don’t believe me?
Let me prove the power of the freemium pricing model to you.
In the following (FREE) fee proposal mini-series I’ll introduce you to an Architect by the name of Richard Hawkes.
Richard finished our Fee Proposal training approximately 5 years ago and immediately started implementing a freemium pricing strategy…. with great results.
Richard is now receiving approximately 10% to 15% of his annual revenue from this strategy… but don’t let me spoil the story… check out the free mini-series and hear it from Richard in his own words.
Make sure you execute the Freemium pricing strategy correctly!
Now… before you go and implement this strategy make sure you understand WHEN and HOW to implement this strategy correctly.
Yes, that’s right… if you implement this strategy at the wrong time… or if you say the wrong thing… then you’re going to end up selling a free service when you could have gotten paid… or worst yet… frightening the Client away.
Make sure you get it right the first time and every time by learning from the best.
Here at Blue Turtle Consulting, we offer Fee Proposal Training and Recourses for small to medium-sized design firms.
Part of our training includes providing you with a script so that you (and all members of your team) can implement this strategy correctly and benefit from the results.
To find out more watch this short training video. Fee Proposal Mini-Series