While giving away your product may attract lots of free users, you need to be focused on attracting paying customers.
Traction, not traffic, is the goal.
The argument often made is that free users will provide the requisite learning to help you later attract paying customers. But free users don’t behave the same way as paying customers.
When considering a freemium model, you’ll be better off first focusing on the premium side of your business model first, then backtracking into free as a marketing tactic.
Using the factory metaphor, users represent unfinished customers (or inventory). Unused inventory is a form of waste.
Focus on increasing the number of customers, while reducing the number of users.
Would you rather have 1,000 customers or 100,000? What if the first group had a lifetime value of $1,000 while the second group had a lifetime value of $10?
Both represent the same revenue, but your net revenue (profits) will most likely be higher with the first group. This is because your operating expenses of serving 1,000 customers will most likely be lower than that of serving 100,000 customers.
Additionally, churn (or attrition) is a killer as your number of customers increases.
It is generally better to have fewer high-value customers than lots of low-value customers.
A VP of Sales is an accelerant. They can take a sales process that already works and make it better. But they can’t create a sales process out of nothing. That’s the job of the founding team. The founding team needs to generate early demand for its product before bringing in a VP of Sales.
Founders need to own early demand generation.
Can you imagine Steve Jobs asking customers what they’d be willing to pay for an iPad?
It’s not the customer’s job to set pricing. That’s your job.