Summary: If you adopt a freemium business model, your marketing cost is the free users. Can you afford that?

Other Options

• Free trial only; no free plan.
• Full featured for 30 days, then drop to free plan.
• Ad-hoc payments for certain features, rather than plans (use your own domain = $3/mo, newsletter module = $5/mo). Would need to offer yearly payment plans. Can add up to more than premium plan, or less. A different coding problem. Could be harder to market each feature individually than to market a better plan.
• Ad supported free plan.
• Offer something else free, like a WordPress plugin. That will get you some word of mouth/traffic.

More Advice

• Don’t give away free what people will pay for. i.e. their own domain.
• Try to have usage limits instead of restrict features. IE 1000 subscribers free, pay over that. Rather than, you can do X but not Y.
• Free users are only as good as they convert, and bring in paid clients.
• Eventually, offering a freemium plan reveals segments. Paying customers are a different segment than non-paying customers.
• B2B is more likely to pay than B2C.
• Ask freemium users to tweet about it.
• Freemium has to have enough features that it is still useful for people, but without enough features that they will want to upgrade.
• Educate your users as to why the premium features are worth it. Use your own domain – this is good because it’s more professional, easier to remember.
• If you start out with free beta, do not take people’s features away or tell them to pay. Instead, offer new exciting features with launch to incentivize them to upgrade. And give them a discount.
• Give people credit vouchers for giving good feedback?
• Don’t require a credit card in advance. It’s annoying.
• If you have a very small niche, the freemium benefits go away.
• During the free trial, be sure to train/coax/nurture customers to help them convert.
• With freemium, paid users are paying for the free users. Not so hot for them. Ethical question?
• Freemium can be a way to educate the market if your offering is innovative.
• It may boil down to the cost of upkeep of the free user.
• Freemium works well for products where you naturally increase – like MailChimp, people naturally grow their subscriptions and then have to pay.
• Studies find that the ratio of free:paid is 10:1. So does your paid plan cover 11 users?
• 37signals founder says some free users convert, but most paying users started out as paying users.
• Dropbox: “If you adopt a freemium business model your marketing cost is the free users.” (Although–I guess more in who they tell than in themselves?).
• Being a social product helps you spread virally.
• For some products, like Evernote, free users become inactive and drop off, and active users start paying. .5 go premium right away, 2 percent after a year.
• Evernote: freemium works if you have a great long-term retention rate (so each customer is pretty valuable?), a product that increases in value over time, and variable costs (what does this mean?).
• Offer flexibility and data export to eliminate buyers regret.
• Only charge for things that are hard to do.
• Just because one company had success or failure with a strategy doesn’t mean you will. Many successful companies are outliers, not good examples of typical scenarios.

Articles

On Startups: To Freemium or Not to Freemium

On Startups: Why Your Startup Shouldn’t Copy 37Signals or Fog Creek

MailChimp: One Year After Going Freemium
Thesis: Don’t go freemium until you are really big and can afford to. Then it will really help your growth. But it will cost you too much to do it at the beginning. At the beginning, only offer what gets paid for. Build the “1″ before going for the “10″. Then you will also know the costs, have the numbers.

Rob: Why Free Plans Don’t Work
Thesis: It’s fine for giant companies, but micro-businesses need to focus on revenue. If you don’t have the ability to capitalize on word-of-mouth marketing, then your free users aren’t doing you any good anyway, and they suck resources that you may not be able to pay for.

Freemium in Pandora, Dropbox, Evernote, WordPress, and MailChimp
Case studies of big companies with freemium models.

Analysis

I decided to try to keep the benefits of the Freemium plan and reduce the potential risks.

Instead of Freemium-or-not, go for the smartest way of doing Freemium.

Maximize Benefits:

• We want to have a directory. Directories don’t really have value once they get a lot of people in them, so it behooves us to have the listings be free.
• By giving people a subdomain, they can put mysite.healertree.com on their business cards when they are starting out. A la VistaPrint.

Minimize Risk:

• Any part of the website builder that would be very rife for abuse we should push to the paid plan. The free plan will let you make a basic website, but the content types will be limited. Reduce the attractiveness for sploggers.
• Content in the website builder will also be used in the directory, so it will be visible. Have a “flag this listing” a la craigslist so visitors can help us weed out any spam.
• Don’t offer email services (newsletters, mailboxes) on any free plan.

Contrast this to a site like Consumer Reports. You pay for content, so the users are the customer. They don’t take any advertising, which is the core benefit for customers: objective reviews. Their motivation is to provide quality content so you value the service enough to keep paying for it. There is no motivation to manipulate, as the number of pageviews doesn’t matter.

Here is another example: Farmville. This game makes money by charging for certain premium items and extras. They are very careful to not make core gameplay require money. They only charge for things that are shortcuts or luxuries. But still, their business model depends on getting you to keep playing, and to want those luxuries. So, over time, their game gets more and more bloated as they try to add new ways to entice people into paying for items. They build in annoyances and repetitive ways of doing things so that you’ll want to buy the shortcut. While their user is their customer, the way they make money still encourages manipulation of the user.

Contrast this with another game, Runescape. In Runescape, free members get access to a subset of the game features–certain features are members-only. But once you pay the members fee, you have access to everything, and it’s similar to Consumer Reports: they are motivated to create good game content so members keep paying. There is no motivation to manipulate the user.

I think all users want two things: great content and a great user experience. So the question is, does your business model align you with what your users want?

Does it make your customer want to pay (to get more great content and features)? Or does it manipulate them into buying, or give them something they don’t want (ads).

It may sound like I’m advocating that you do one or the other. I’m not, exactly. I know some things wouldn’t lend themselves to a paid content model. Would I pay for Facebook? Would it have achieved the widespread use it has if it had cost money to join? Probably not. Facebook is like TV: they got people addicted so they could show them ads.

I watch TV. And I use Facebook. And I’ve played Farmville. But I don’t necessarily think any of these are good for me, and they all have an addictive quality. I feel ambivalent about them. The thing that I don’t like is they benefit when I’m addicted. So they are motivated to make their user experience addictive.

Whereas the services I pay for like Consumer Reports, I generally feel good about. I don’t feel like they are trying to get me to come back and addictively use their site. I pay for it so that its there when I need it.

Here are other cases where you get for free, where the company is actually serving someone else, and as the user, your interests are not really their priority: credit cards and banks. Most accounts are free to open, and these industries are heavily regulated to keep them from completely exploiting their “free” users.

Free definitely gets you a lot of consumer adoption quickly. It’s a business model that works. But for who?

For my own sense of purpose and joy, I would rather be building something for my users, rather than for advertisers. It feels better. It feels cleaner.

This is a new series I’m trying out – monthly roundups. I do a ton of research and optimization all the time, so why not share my findings?

This month…

HealerTree: In the Works

We are building HealerTree. I’ve been thinking through a lot of business strategy around pricing and features. I’m loving the OnStartups and UX Stack Exchange.

The New Car: Still lovin’ it!

I got a new car in March! A Toyota Corolla. I got it at Broadway Toyota and had a great experience. I donated my old car (’86 Camry) to the Portland Rescue Mission, which was painless. They actually recondition and sell your car, they don’t just scrap it for cash like some of the national car donation places do. My car was old, but still in good shape; it pained me to think of it being demolished when it had a lot of use left in it. New car smell = awful. I got an in-car VOC air filter which helped a bit. Rolling all the windows down while driving helps a lot, but in Oregon you can’t do that every day. After a month it is much better. I also got these floor liners instead of mats – way more protection and they fit pretty snug.

My Hair: Longer and Redder

I’m growing out my hair–final length to be determined. Mid-length hair is a different beast than short hair: I’m experimenting with new product and a fancier hair dryer. I decided to dye it red again. Bright orange-red, with henna. Henna is permanent, unlike any red chemical dye – they wash out of my hair pretty quickly and become a dull blech-y color. Henna stays bright and dramatic forever. Plus it coats your hair, thickening it and giving it more volume. And bright colors in general give the illusion of volume. Which I need, since my hair is super-fine and if left to itself it looks incredibly limp.

The Pattern Eraser

I developed a very cool process to change an unwanted habit I’m calling “The Pattern Eraser”. I’m going to publish it on Tao of Prosperity - email me if you want an advanced beta copy. It helped me shift my “holding on to clutter” pattern and divest myself of nearly all of my Windows machines and peripherals (donated to FreeGeek), my Xbox (traded it at GameStop for credit toward a PSP Vita), and a ton of Goodwill items and books. I donated my car instead of going through the laborious process of selling it…I’m letting go of things all over the place. Feels great.

Tax Software

Uh, boring, I know, but it’s still got to be done. I’ve used H&R Block Online for several years, but people say good things about TurboTax so I demoed it. Didn’t like it. H&R isn’t perfect but the switching costs wouldn’t be worth it anyway. I have a tax procedure and know exactly what I need to do so it takes awhile but it’s doable. I did NOT pay the extra $5 for the “Best of Both” because I did that in 2009 and what I learned was a) it delays things considerably with all the back and forth and b) she didn’t tell me anything I didn’t know and couldn’t have figured out by looking carefully at my return and making sure everything was correct. Which is what I did this time. I caught several errors, which I had to go back and address. Taxes aren’t difficult; they just require focus and precision, which are my strengths. So it’s faster for me to do them myself than to gather up all the materials and explanations for someone else to do them. I like to understand where my money is going anyway. So, YMMV. And thankfully, Oregon now lets you pay your estimated taxes online. It’s a horrible interface, but it works. With all the money I’m paying them, can’t they hire a better software team? The only check I have to write for taxes now is the Tri-met tax.

RC-S: The Most Efficient Form of Therapy?

I took the RC-S intensive from META. RC-S is a way to work with people to state-shift out of being un-resourced or triggered, into a resourced place, without engaging in any of the content of the trigger or story. Of course there is more to it than that, but it can be quite a shortcut. After the training I felt solid as a rock for a week. Then it wore off, but I’m still feeling in general more grounded, and I have a new framework to understand my crazy when it comes up.

The Squatty Potty

Don’t laugh…ok, laugh if you want. It’s pretty amusing. But it’s good for your colon. People are meant to poo while squatting; this stool (heh) helps you assume the position.

I am loving:

• Evernote - between Evernote, Dropbox, my iPad, the ScanSnap, and Google Docs, I’m going as paper-free as possible.
• Pandora - with in-car BlueTooth! Excepts it kinda kills my data plan.
• IFTTT (if this, then that) – set up conditions like, if I star an item in Google Reader, it tweets it.
• bionaturea Gluten-Free pasta - yes, it is actually good! And erm, no, it is not Paleo….I’ve been kinda slipping off the wagon a bit.
• Nuts.com - mmmm candy. More slippage.
• Moo Cards - we want to integrate with their API for HealerTree so our customers can print cards that match the design of their site. It’s going to be EPIC!
• Lechuza self-watering planters - so good for my laziness.

That’s all for this month!

Scanner (coined by Barbara Sher in Refuse to Choose)

Deep Divers can by temperament and disposition fit happily and deeply into one career focus. Scanners can’t, or at least not easily and happily. Scanners by temperament need to do different things, follow different ideas, fulfill different parts of themselves, and in many cases have a series of careers or be involved in parallel fulfilling activities. (Think Differently)

Other terms:

• Serial Enthusiast
• Renaissance Soul (from the book with the same title)
• Multipotentiality (Wikipedia)
• Polymath (Wikipedia)
• Slasher – i.e. writer/entrepreneur/designer

Community?

• Puttytribe from Puttylike - a community for multipotentialites

From Puttylike:

Boredom usually hits once we’ve learned what we are meant to learn on a particular topic, and instead of moving on, we try to continue down a path we’re no longer interested in. Boredom is our body’s way of telling us that it’s time to move on to something new.

Yes!

Where I’m at with my multipotentiality:

Too many blogs! I want to embrace that I can cover many different subjects on one blog, and be myself, rather than create a new blog for every interest I have and then abandon them. While some things need to be separated out, many can happily co-exist if I can let go of that embarrassing feeling that I’m introducing something too divergent. (Can I talk about my doll obsession? Hair product reviews? How I’ve perfected gluten-free Mac & Cheese? An in-depth discussion of why Shopify is better than the alternatives? Well, I guess I’m gonna…)

Publish more. I have dozens (hundreds?) of potential blog posts locked up in my Google Docs. I research everything. I am prolific privately, but not much of it makes it out into the world. I want to change that.

Easier personal branding. Instead of describing myself as a writer/entrepreneur/designer/geek, I want to describe my current mission (to empower healers to succeed in business), and enduring qualities (I like optimizing experience). Organize around these, rather than particular methodologies, “career paths”, or topics that are too diverse to go into or change from day to day.

Exploration, not reinvention. Just let myself explore things without going overboard.

• I can take an RC-S intensive without becoming a therapist
• I can make doll clothes without opening an Etsy shop
• I can immerse myself in a new obsession (like cooking) without creating a new blog for it.

But I’m weird in so many ways…

I’m not just a multipotentialite…I’m also:

• very fluid with time, sometimes called a polychrone
• a relator and an introvert – an odd combination
• a spiritual geek – another odd combination
• self-employed – meaning that I am out of sync with the entire working world sometimes. But hey, I can shop when there are no lines.

So, to summarize, I have an ongoing project to accept that I’m different than most people and that’s OK. It’s more than OK…it’s all the ways that I’m awesome.

• One little cordless one (bad suction, battery dies easily)
• One hand-held corded one (awesome suction, but too annoying to have to plug in for small jobs)
• One upright bagless (works pretty well, but so loud I have to wear noise-canceling headphones, plus it it’s big/bulky)

We were in CostCo and saw this space-age looking thing:

It’s CORDLESS. Which greatly reduces the barrier-to cleaning. Which I seriously need. Because while my Virgo-ness makes me enjoy order and cleanliness, it does not seem to extend to making me enjoy the process of achieving order and cleanliness.

Oddly, Amazon only seems to carry the non-Animal version of the DC35 (which gets great reviews). But the Animal seems to be the same, it just has a purple head instead of blue and comes with an extra mini motorized brush that is optimized for removing pet hair from upholstery.

Long story short, I bought it.

You can vacuum for 15 minutes with a regular attachment, 13 minutes with the rotating-head variety of attachment, and 6 minutes on the “Max” mode for more suction.

Yay!

• You can attach the attachments to the hose as pictured above, or directly to the head to make a mini-vac. This is awesome if you want to vacuum your curtains, upholstery, car, or your pants (er, if your cat shed all over them).
• The lower barrier-to-cleaning thing is HUGE. When I got home, I took this nimble creature into areas of my house I hardly ever feel like lugging my big ol’ vacuum to. Without the cord, vacuuming is so much less of an investment.
• Personally I feel that the limit of 15/13/6 minutes you can vacuum isa good thing. It makes me feel like picking up the vacuum will always be a small job, because it can only last a maximum of 15 minutes.
• The recharging station neatly stores your attachments. Well, two of them…I guess the extra “pet hair” attachment wasn’t figured in to their plans when they built it.
• When I got it home, I had just vacuumed my big rug the day before. I scrubbed it with this thing and it picked up a lot of fur and looked a lot cleaner. And I didn’t have to wear earplugs to do it. =)
• For branding geeks…there is a cute booklet in the package titled “The Dyson Story” that details the history of Mr. Dyson and how he took the idea of bagless vacuums to major vacuum manufacturers and they were like, “Are you kidding? Those bags are recurring income!”. So he had to make his own.
• This vac has the full power of a corded one, which is pretty amazing. And it doesn’t wimp out slowly. It’s full on until it runs out of juice.

Hmmmm…

Overall, I give it an “awesome!”.

While there is a lot of Hmmmm…. here, I think most of it falls under the category of “pet hair is hard to vacuum” rather than “this vacuum is bad”. This vacuum has a lot of suction, and a good brush, and the rest is just physics.

I’m pretty sure that this will enable me to get rid of all my other vacuums. I certainly don’t need my two handheld ones anymore, and I think the upright can also go…if I had a bigger house, I could see wanting a big vacuum, but with 750 square feet I’d rather have the closet space back.

Links

Here’s another review that’s helpful.

They kinda grew up. They’re all, like, sophisticated and stuff. And they are going places.

They are actually the same boots I had originally used back in 2006…but retooled a bit. And they have legs now–excitement!

The new tagline is “notes from a UX geek”. UX = user experience (design).

My goal with the redesign is to give the blog a focus.

In 2011 I gained a lot of clarity about who I am and what I want to do. And it boils down to “UX”. UX for software, and UX for life. I’m an optimizer.

A few months ago I gutted the blog, removing most of the older posts because I wanted to establish new lines between public and private and eliminate the “processing out loud” aspect. I couldn’t see any value in them if you weren’t interested in my personal history, and I don’t like just leaving crap laying around.

But I still didn’t have a focus and it felt like this blog existed for no reason. Perhaps it had outlived its purpose?

Perhaps it has, but with this new design I am attempting to take it in a new direction and we’ll see if that pans out. =)

Creating a billing system…sounds boring, right? But actually developing this project has been one of the most exciting things I’ve done in my life. What I’ve discovered is that software architecture and usability design utilizes new parts of my brain and soul, and it fully engages me like nothing else has.

There are many things I’ve dabbled in (and been obsessed with) over the years, and although it might seem like software development uses a very specific skillset, my role in the project was multifaced. I’m not the programmer (Emily is). But I’ve done programming, I’ve done design, and I’ve worked with data. I know enough about all the pieces of the software puzzle to enable us to collaborate in a unique way on the level of ideas and structure and user experience.

Not only that, but the methods we used to work together we also engineered as we went. Starting out from the classic development model of creating a spec and then trying to create software from it turned out to be hard. And dull. Documentation gets outdated quickly, and it’s hard to maintain; it doesn’t live.

Halfway through our project, we switched gears to an agile development process called Scrum. They have mottos like “discussions over documentation”. You work in “sprints” of one or two weeks, creating focus and clarity. The team all works together on the same part of the project and creates usable code each sprint, so you have an immediate sense of accomplishment and teamwork.

Scrum is more gratifying  than traditional ways of working. It increases happiness as a developer. And it releases you to improvise and develop software iteratively, instead of trying to match a spec that is months old and no longer reflects the great idea you had last week while chatting over coffee. It helps the project live and breathe. It produces better software.

This experience has opened a whole new world for me. I always knew that I wasn’t a programmer. As a designer, I’m good, but I’m not great. (for example, I am more of a font snob than a typographer). I like to write, but only when I’m inspired. Given how fascinated I am with personal growth, I’ve thought of becoming a coach or a therapist, but I’m not suited for it. I’m an ideator, a strategist, a creator.

This–being the idea part of software development–this I can be great at. This I dig completely. It brings in all the skills I’ve developed and all my strengths. And things that have frustrated me about myself make sense–like, why am I eternally annoyed at tiny inefficiencies in the day to day world that don’t matter in the grand scheme of things–oh, because I care about user experience! I don’t need therapy, I need to create software!

At the very end  of this project, we started creating a new project to help us work better. It’s nominally a bug tracker or a task management system, but it’s really a way to work in this Scrum style, which makes quite different assumptions than typical task trackers.

The billing system I had to build; this I want to build. I want to create something that helps people work happier. I’ve always believed work should be fun, but it turns out that it’s not as simple as “do what you love”. When you start working on teams, on large projects, doing what you love can quickly become awful. Structures matter: they can empower creativity or frustrate it. I loved the process of working on this project, and I want to help other people feel that way.

I don’t know exactly where this is all going, but I’ve never been so excited about work. I’ve always felt like a dabbler. I built Acorn Host so I could support myself, and that it does, and it’s a quality product that I’m committed to, but I’m not like, in love with web hosting. I have always felt like I wasn’t fully utilizing my brain, and yet I hadn’t found anything that fully engaged it. So this is a happy day for me. I’m not sure where it will lead, but I wanted to share that much with you.

But do you want to express them?

The Creator Archetype feels like a raw rush of wild energy. I want to make and make, write and write. I stay up all night creating something. I babble excitedly. My mind goes in a million directions. It feels like drugs.

But when it’s all over, I find my sleep patterns are disrupted. I’m tired, worn out. Cranky. Empty. Hung over.

Sometimes I have something cool to show for it. Sometimes I just have a long bunch of idea babble in my journal.

So hear me roar: It’s time to have some boundaries with the Archetypes. I’m not your bitch, Creator Archetype! I’m  not going to surrender my will to take care of myself just because you have some great ideas you want to force through my mind/body. You don’t have a body, you don’t know what it’s like. I’ve got to take care of things, or I feel shitty. So you can just take a number, and I’ll do your bidding on my time.

I don’t want to be driven any more. I want to do the driving. This is my car.

The Plan

1. Have an organized place to put my ideas, so I don’t feel I have to implement them right away. I am using Evernote with my iPad.
2. Adopt a consistent bedtime, and other self-care habits.
3. Remind myself of the principles below.

Principles of Sane Creativity

1. Creativity is more like a spigot I can turn on and off than the weather that comes and goes without my control.
2. I might hear a “knock” on the door inviting me to be creative, but I don’t have to answer it. And if I don’t, it will come back, in one form or another. Creative energy never disappears.
3. Burnout is much easier to prevent than to cure. Take it easy.
4. There is no net gain to over-doing. If I overwork one day, I’ll be tired for two. I would have gotten more done if I just worked a reasonable amount every day.
5. Don’t try to fit creativity around “real” work. Do it first thing, so you can go through a whole cycle. Fit the boring work around the creative work–that way you’ll work through the creative energy and not have to stay up late.

I will probably do more with the navigation and sidebar at some point. But for now…eh.

What I’m loving about Tapestry: simple, tumbler-style design. Support for post types like asides and images. What I’m not loving: no Design Options page like Prose has (Prose is my usual go-to for new WP designs).

What I’m loving about Genesis: everything.