Ask HN: Thinking about changing business model

https://news.ycombinator.com/item?id=2056777

by nicholasreed • 16 years ago

4 5 16 years ago

news.ycombinator.com

I built a scheduling program for businesses in a niche market (~1000 potential customers) that now has 4 customers that each pay ~$300 per month. While current customers love the product (saves time/money, very simple to use, selling point to their monthly customers), attracting new clients has proven very difficult. For every prospect I have talked to, they say that price is the only obstacle. These customers are operating on a "very thin" budget and I am having tremendous difficulty convincing new clients to sign up.

So, I am looking into switching from a subscription model to an ad-supported one so more clients will sign up. I assume my per-customer revenue/profit would go down, but my increased customer base would overall make me more money. But, I have no idea how conversion rates work.

Does anyone have estimates on what the following data would be able to produce for monthly advertising income?

Monthly averages (total, not per customer):

72k pageviews

48k unique pageviews

9k visits

2k users

7.92 pages/visit

3 min average time on site

cabinguy• 16 years ago

If you are selling ads directly (just as hard, if not harder than selling your product) - it will depend. You would have to get huge CPM's with your traffic for it to make sense.

If you are going to use an ad network (adsense, etc.) you will make almost nothing. Way, way, way less than the $1,200 you are currently bringing in.

Here is what I would recommend: Offer your potential clients a free trial. Let's say 30-90 days. If your product is valuable to them, you will be able to convert them to paying customers. (Like your neighborhood crack dealer. Give it away for free, get them addicted and see who comes back for more! Its a proven strategy.) The key is to get them using your product.

Also, there is no rule stating that you cannot show display ads/text ads AND charge for your product. The only people who complain about ads are hipster/early adopters. If your customers are not redditor types, you can most likely have your cake and eat it, too.

nicholasreed2• 16 years ago

My market is private tennis clubs.

I am currently offering a free, no obligation 1 month trial with no long-term contract. Each customer has their own domain name and I customize each site to match their existing website's look and feel.

I show them testimonials from current customers, examples of how much time can be saved by moving from old systems (usually paper or an Excel spreadsheet) as well as dollar translations from time saved.

Once a customer signs up for the trial and begins using my system, they have already made the decision to keep it for years. The hardest part is having them make the jump, and the price keeps on showing up as the only obstacle. I've tried determining if it is a "fake no" and they have other reasons, but so far that honestly seems to be the only reason.

When you say way, way less, what would you expect for CPM? From reading around, a highly targeted audience (in my case, I know exactly what sort of income bracket, age, etc.) would have higher CPMs, up to $35. If I saw $5 CPMs I would be around $350, so I would need 3.5x the number of customers. I just don't know if $5 is even a number I would be close to reaching with my audience.

$50 a month should be a non-issue for my customers, even non-profit, member-owned ones.

rudasn• 16 years ago

have you considered offering a "pay as you go" package based on the clubs membership count? they pay a flat fee of X a month (or X-5% a year) and Y per member per month. This only makes sense if your program has something to do with the club's members (booking courts, managing renewals/subscriptions etc).

btw, what sucks the most in tennis clubs is finding a court to play. it would be very cool to send a text and say "15:00 today" and receive back a text saying "Ok, booked" or "16:00 is better" or something like that; or "next free slot" and receive back "16:00, court 5. Book?".

david_shaw• 16 years ago

Switching to ads is a very difficult way to sustain your current ~$1200/month, much less grow it.

I created a bedtime calculator called http://sleepyti.me that usually brings in about 10k hits per day. At that rate, I earn between $10 and $20 per day, or $300-$600 per month. Although I consider that revenue to be an astounding success, it is less than half of what you're making right now through the few customers you have.

I agree with cabinguy that a free trial system seems to be your best bet. Don't pull a bait-and-switch with the prices, but offering a 1 month trial that shows how easy and efficient your app is seems like a great way to hook potential customers. Maybe your price point is a little high, and you could be willing to let customers wrestle it down to, say, $200/month. Pricing is difficult, and especially without knowing your niche it's a little hard to say, but the rule of thumb is that if people say it's too expensive, it probably is.

Alternatively, you could meet somewhere halfway and offer a six month "special price" at $100/month or something to see if you can hook people in that way. Either way, I wish you the best of luck!

Ask HN: Thinking about changing business model

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