We are about to finish building a table reservation system (think OpenTable or SeatMe but on steroids). Although it's a "Me Too" product, we will offer features that our competitors can't or won't, e.g. bigger API control for restaurants, various hooks to extend the service such as food delivery, pre-paid reservations, and ticketing for tables to name a few. Essentially, we will offer an iPhone/iPad app for restaurants to manage their reservations/orders, while their guests can use an iPhone-app/Android-app/Search-Engine/Restaurant's-Website to make those reservations.
I have a question about a launch/pricing strategy:
- Is it sane to do a freemium model for our product? For example, restaurants would be able download our Manager app in App Store for free but it would have limited offline features. If restaurants want to accept online orders, then they must get that feature via in-app purchase. If restaurant wants to incorporate discount cards, then it's a different in-app purchase. This logic applies to all different features.
- Or should we go through a regular sales process, i.e. sign up restaurants one-by-one, charge them via check/credit-card/etc and escape Apple's 30% cut?
Thanks in advance and I hope it will be helpful for other startups that are in a similar position.
I think you go freemium if the market is large enough to support the idea that if you just convert a small percentage of customers, you'll still be a successful company. If the answer is yes it's large enough, then whatever strategy gets your software in the hands of the most number of users should be the path you follow.
Now, as a startup, I wouldn't start by competing head to head with OpenTable's salesforce going after their customers. That sounds expensive. Also, getting people to switch providers is always way more difficult. Plus, I think people value OT not because of their features but because of the network effect they bring. Don't get me wrong, you'll definitely still be going one-by-one and converting users, but I don't think you should start with those using your competition.
Instead start with new restaurants or those not using anything. To them, you'll feel like a miracle.
The reason you want to maximize distribution of software and engagement (having something that even the free plan is worth talking to people about) is because going freemium is not unlike investing in startups or building up a portfolio.
You invest in your customers in mass (with free features not money) and you hope a small grouping of them will make back that investment many fold.
Like investing, freemium works best as a long term strategy. So when you look at your upgrade triggers, be sure not to cripple that free plan so much that you're optimizing for conversion rate for users as SOON as possible. Convert them when they've grown to be successful. So they can say you were a key part of their success.
1. We definitely want to start with countries, which OT hasn't penetrated yet.
2. Since we will start with restaurants that do not use OT (or similar service), we may consider having only paid plans. And maybe convert to a freemimum model once we are ready to compete with OT in USA/UK.
We are about to finish building a table reservation system (think OpenTable or SeatMe but on steroids). Although it's a "Me Too" product, we will offer features that our competitors can't or won't, e.g. bigger API control for restaurants, various hooks to extend the service such as food delivery, pre-paid reservations, and ticketing for tables to name a few. Essentially, we will offer an iPhone/iPad app for restaurants to manage their reservations/orders, while their guests can use an iPhone-app/Android-app/Search-Engine/Restaurant's-Website to make those reservations.
I have a question about a launch/pricing strategy:
- Is it sane to do a freemium model for our product? For example, restaurants would be able download our Manager app in App Store for free but it would have limited offline features. If restaurants want to accept online orders, then they must get that feature via in-app purchase. If restaurant wants to incorporate discount cards, then it's a different in-app purchase. This logic applies to all different features.
- Or should we go through a regular sales process, i.e. sign up restaurants one-by-one, charge them via check/credit-card/etc and escape Apple's 30% cut?
Thanks in advance and I hope it will be helpful for other startups that are in a similar position.