Here’s how I see most lean startups. You’re not raising outside capital so you’ve got to charge very early in the game. Cash is king and free is a dream. And potentially focusing on free will kill you. Free needs to be subsidized by someone (angels, vc, strategics, cross-selling, etc). If someone is willing to pay $5/mo for your service you’ve, to some point, validated your service. The easiest thing in the world is to get free users. But it’s hard to keep them active.

What I think is lacking in these discussions is how serious you are about integrated SEO from the start. Google will make or break your service-period! You don’t have the luxury of being destination sites like twitter, foursquare, etc. In fact, no one will know about you except you, your engineer, mom and dad. So how you gonna go big?

Yes, validate early if anyone will pay. Then focus on getting found. Right now, that means Google. It’s totally backwards to focus on optimizing and tweaking when you’ve got no traffic. After six years in business, I tell you with conviction to focus on being found. If you have good traffic volume, a monkey can pick three successful business models. But if you have no traffic, you have a cute little site that maybe pays you a few grand a month.

It was really interesting to see your experiment.
May I ask you why you currently use “Freemium” despite “Single unlimited plan” performed better in the testing above?

http://www.getcloudfire.com/pricing2.html

To exemplify, currently, we have worked on two profiles of clients in our MVP, it is a kind of integration for a specific business. Actually we do not know how to charge yet: SaaS, fixed price, price by modules, freemium or percentual of transaction, free until market-fit. I do not know how to test all of them yet and collect relavant data, maybe it will cost too much too, instead I am thinking of choosing the one that makes sense based on previous experiences that we have right now. We runed some tests on percentual and it seems clients did not liked, freemium does not make many sense because our market is huge, modules is a too complicated solution right now, fixed price does not scale and we think that we could try to charge for the MVP.

Well, if we decide to advance with SaaS, we need to find the variables and ranges for the price. I am not sure how to do that right now, I will probably try to do tests on Web (I am not sure if we will get relevant data in our market – hypothesis) or direct interviews. If we go by direct interviews, we need to have a way of conduct and measure that, which I think is the hardest part. I will try to figure out the best way.

Thanks in advance.
Bruno

I think first off it’s important to establish the goal: To get to product market fit.

Then that means the role of pricing is to maximize learning, which is how you will get to PMF fastest.

In some cases you need to charge users to maximize learning, otherwise they won’t take your product seriously enough to use it.

In other cases you learn more by letting users have access to everything, uninhibited.

I think it’s only useful to test price to maximize learning towards finding PMF, not for the reason to see if people will pay.

If people pay before PMF they are paying for a “nice to have” product by definition and that’s not a scalable, repeatable process. Their purchase is due to extraordinary circumstances, such as a hard sell by the founder, or the user was wealthy and didn’t mind paying for it after the trial was up, but ended up not sticking with the product.

“Will you pay for this?” is really just another way of saying do I have Product Market Fit – But it’s an inferior way of measuring PMF to the question, “Would you be disappointed if you could no longer use this?”. Paying customers are one way to measure if you have PMF but it’s a layer of abstraction above what you actually want. You can try to infer from pricing whether it means you have a must have product or not, but it’s harder to determine causality up a layer of abstraction.
It’s better just to measure directly whether people would be disappointed if they could no longer use it.

I think it’s also worth noting that you may have hit Product Market fit right off the bat with Cloud Fire. If someone is really good at Customer Discovery, which you are, that’s a possible scenario.

And in which case Sean would agree that you need to implement a business model and start charging right away.

One other thing that strongly influences your experiment is pricing. What would be the difference if you had $9.99 less in some plans? I think there would be some potential on multi-variate testing with pricing as a new dimension to it.

However, a quick search revealed that the same rule doesn’t apply in the online world, and Amazon routinely does this: http://writ.news.findlaw.com/ramasastry/20050620.html

So while “not technically illegal,” it might still be something to consider if you have a close-knit user base or just want fairness in pricing.

Glad you brought that up.

Please could you elaborate on how, specifically, this is illegal? Thanks again!