Ask an Expert: How to transform a free model to a paid platform

Posted in Blog
Sep 13, 2016

Welcome to Invest Ottawa’s new series Ask an Expert; where OUR experts answer YOUR questions. If you have a startup related question and are looking for some help, send us an email. Our EIR’s, Advisors, and Entrepreneurs are on the job!

Missed last week’s post? Click here to read about what to prioritize when building a marketplace.

The problem with fundraisers in a single sentence: they make it so darn hard to donate!

Now granted, this may not always be true for some charitable events. They may be equipped with a hoard of credit card machines and volunteers ready to handle the copious donations at the drop of a hat. But with the gradual shift from physical money to online payments and plastic cards, donating to even the worthiest cause can be a struggle. That’s why uOttawa students Liora Raitblat and Lemuel Barango created Go Give Back; “Your mobile donation platform.”

Go Give Back launched an app that collects on-the-go donations and analytics for charities. It’s as simple as a donor tapping on his or her phone and sending money to the worthy cause in a matter of seconds. The startup has already worked with great non-for-profits such as Habitat for Humanity, Causeway Foundation, ONFE, and have their sights set on becoming the go-to solution for mobile donating (so if you know who might need the help, give them a shout).

“We’re really excited to be working with some incredible charities and nonprofits in Ottawa, and we’re already seeing how the platform is providing a more instant and engaging channel for their donors.  The work is very rewarding, and we’re looking forward to expanding the platform to build stronger communities!”

But the one question on Liora’s & Lemuel’s minds is what do you have to consider when creating pricing? Currently, Go Give Back runs on a free model and is considering a move towards monthly payment plan.

How do you communicate that change to your current and future customers,” Liora asks “is it best to keep a small tier for a free plan?

Ask a Biz Expert:

jacques_renaudJacques Renaud: Founder of SensiVU, L’Académie entrepreneuriale de Prescott et Russell Coach & Invest Ottawa EIR

Pricing is hard to get right. At the root of every successful pricing model is a strong understanding of the value that your application creates for your customer. In my experience, if you discuss pricing with customers, before they are educated on the financial benefits of your application, any price will always be too high. Here are some good questions to ask yourself before creating a pricing model:

– Is the perception of value of your application the same for small and large users?
– Which model would be easier for your customer to understand; user-based pricing or activity-based pricing?
– If your application did not exist, what alternative tools and processes would be required to accomplish the same goals? How much would those tools and processes cost?
– If you have direct competitors, what is their pricing model?
– What does it cost to support one customer (infrastructure, support, management, engineering, marketing)?

To answer your second question, when shifting from a free to paid model, you will invariably lose users. For those who understand the value of your product, it becomes an ROI discussion and they should start paying. For those who don’t get the value, they may leave, which isn’t necessarily a bad thing. If your “free app” delivers a little bit of value and your premium app adds desirable premium features (to a good portion of the market) then that could make conversions much smoother. You may need to test different models and price levels before landing on the best one. Getting pricing and revenue right is crucial the survival of your business.

Good luck.

Parm Gill: Managing Partner at Gill Group, BoD at Network of Angel Organizations and Invest Ottawa EIR


Moving from a free model to a monthly pricing model will always be tricky.  This is mainly due to the fact that once people see something as free; they’ll expect it to remain that way. That’s why I would recommend one of two things.  Firstly, to engage with new customers, you can offer your product at a discounted or cost-free price point for a set duration.  This way, after the allotted amount of time expires (whether it be a week, a month, three months, etc.) you can graduate these ‘trial’ customers into full paying, permanent users.  This period allows customers to test the value of your offering and see whether they’re prepared to pay for it.  This will also allow you to assess which functionality customers are using vs. what they are not (more on this later).

Secondly, (as you mentioned) you can offer a free plan; however, this plan should have significantly fewer features and less functionality than your paid subscription offering(s).  The goal will be to upgrade these customers as you move on.  Now, referring back to my previous point, if you have been assessing what features/functionality are most used during a free trial, you can now take one or two key features out of the free offering and offer those in your paid version.

As for pricing your monthly payments, this is simply a case of market demand.  You can start off by referencing your competition’s pricing structure. Once you have a good gauge of your market, you can adjust your price based on the feedback you receive from customers. After some time, you can also begin to adjust your offerings based on usage patterns/behaviour.

So in short…

Scope Out Your Competition

Understand what makes you different from the rest so that you can find your competitive advantage. Compare your product to other businesses in the industry and see what is making their pricing models work (or not). Don’t be afraid to get feedback from your customers.

One Size Doesn’t Fit All

Losing customers when transferring to a paid model is inevitable. So when it comes to pricing, trial and error may be the only way to get it right.

You Got to Give a Little to Get a Lot

There’s no denying that people will take almost anything if it’s free. To raise the price you also have to raise the value that you’re providing. Find out what will make your service worth the cost.


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