How to charge your customers
Last week, last.fm, an Internet radio station, announced to subscribers that it would begin to charge €3 per month to customers outside of the USA, UK and Germany. This did not go down very well, and last.fm now appears to be scrambling to give their offended customers some options.
This blog does not care much if the decision is right or wrong, a necessity or a betrayal of longtime users. A decision to charge was made, and we can only assume it was well thought out. Instead, we seek to look at how the move from a free to a paid service can avoid the backlash last.fm has suffered, and convert free users into paying customers.
Step one should be to make the process gradual — why just announce that you have decided to charge a large portion of your customers? Nobody likes to feel that they have to pay for something that has always been free. Start a paid service. Promote it. Give people something extra if they pay more — and only then begin to restrict the free users.
OK — so they do have a paid service already. They’ll give you a fancy black icon, an ad-free service, and let you see who has visited your page. Paying customers can create personal playlists, and their favourite songs become an actual radio station that can be shared. They get preferred treatment on last.fm servers, with the corresponding better streaming experience.
Not a bad start. But I sign up, and nothing points me to it. They do not promote it. People are not shown how great it would be to pay — you have to be looking to support the site to see it. It is almost as though they do not want your money.
Also, instead of slowly moving features to the paid service, they have simply cut down the free one. Thirty strikes and you’re out. No wonder users feel betrayed. It seems almost silly to have to say it, but this blog is determined to outline a better set of steps:
The goal should not be to rid yourself of customers that do not pay — it should be to keep them, while converting as many as possible into paying customers. This is particularly true of a service that purports to be “social media”. An erosion of the user base is unacceptable.
This is where last.fm has failed — the options they have created are to pay, or lose the service entirely. Both options make their customers unhappy.
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I think Flickr is the best example of what you’ve just described. There are constant reminders of what I COULD have as soon as I decide to rid myself of 25 bucks. OH, THE POSSIBILITIES! Many use Flickr for free and those who pay don’t seem to be complaining for the fact that they are paying.
Truth be told, I’m considering paying for Flickr…. The 100 MB upload limit is not enough to last a month.
@aleksey
Flickr is an excellent example — I knew I wanted a paid account from day one, it just wasn’t worth the extra cost for me. When that changed, I went out and paid happily.