Subscription-Based Business: Be Engaging, Never Pushy

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For some online companies, such as software providers, app makers and content creators, it makes sense to monetize their business through a paid subscription service. Most customers are happy to use a trial version or access limited free content. The challenge, however, lies in convincing those customers to buy in once they reach your paywall, the block that prevents a user from accessing content without a subscription.

Tech startup Baydin, which created an email productivity plugin for Gmail and Outlook called Boomerang, learned firsthand what it takes to create an effective paywall. When the company introduced its "freemium" model, it achieved a 4.8-percent monthly conversion rate and generated more than $2 million in annual revenue within 18 months.

"Setting up a good paywall requires a good business model and good decisions about how to message that business model to users," said Alex Moore, CEO of Baydin. "[We built] a paywall that's friendly, funny and never pushy."

The Baydin team found that some of the biggest mistakes companies make when setting up paywalls are not offering enough flexibility, making the core value of its product free and not allowing users to try out any of the premium features for free. In all of these cases, users have no incentive to pay for a subscription. 

"Paywalls that [go into effect] immediately create angst because they close off the product when users need it the most," said Aye Moah, Baydin's chief of product. "Companies who make the core value of the product free charge for extra features that only provide value to a limited audience. And if a user never gets to try premium features, it's hard for him or her to understand how valuable they are and know if he or she wants to pay for them."

The key to paywall success is finding the right balance of value and incentive for the customer. Moore and Moah offered the following tips for businesses that want to create a positive paywall experience to encourage greater conversion rates.

Be flexible. Create a paywall that allows flexibility for customers to access your services without paying, especially at first. A good example is having the paywall hit when visitors come directly to your site, but not if they get there through search, or via social media. You can also provide users with ways to earn additional free services by sharing the product. 

Offer limited full-featured trials. Give users a set amount of time in which they can access all features without limitations, and allow them to see whether it's something they want to buy. Then, move them down to the free tier of service if they decide not to pay.

Be personable. When it's time to ask customers to pay for your service, you don't want to seem like a bill collector. Being personable, relatable, and using some humor or lighthearted banter is a good way to ease any tensions when asking for payment. 

"When we designed our paywall, we wanted to form relationships with our users and have them see us as normal people who are building and providing this service to make a living," Moore told Business News Daily. "So within our paywall, we tell jokes and funny stories, or use limericks about instant noodles to lighten the mood. It's really important to show that there are actual people behind the computer screen providing this service to the users."

Give paid users more freedom. Setting rate limits on unpaid users works well, but limiting your paid users will make them not want to use your product. If your users have to stop and think, "Should I really use one of my 50 credits this month to take this action?" every time they want to use a premium feature in your product, they are unlikely to integrate that feature into their everyday workflow. Moore and Moah recommended making your paid version completely unlimited, if possible.

Don't make your paywall an obstacle. Your paywall shouldn't frighten users. Your lighter users, who never reach their usage caps, shouldn't even know the paywall is there. For heavy users, allow some leniency once they hit the paywall. They may experience some frustration because they are now being told they have to pay for something that they have been doing for free, but you don't want them to leave because of it. 

"At Baydin, we don't institute a hard stop at the paywall," Moah said. "When a user hits the free message limit the first time, we allow them to complete the action even if they choose not to pay. This creates a bond with our users, because they see you aren't just after their money — you want to continue providing a great service to them, even if they don't pay at that moment.