Many Web 2.0 companies have tried to make money by charging for their product, but it can be hard work – especially if the product started out as free. Jott, a voice to text transcription service, is an example of one that took the plunge and succeeded.

Jott moved to a paid model following a successful free beta. I spoke with Jott CEO John Pollard to learn how they did it and how it is working out for them.

Jott is a great tool if you haven’t tried it. It is a voice-to-text service where you call a number on your phone, dictate a note, schedule a meeting, or write a to-do and the service transcribes your voice into the appropriate message type; it even creates an object on Outlook automatically. The service had been in “beta” status and completely free. Recently, they came out of beta and rolled out a paid model with multiple plans for different usage and features.

Jott still has free service, but it’s been put together such that if you are a frequent Jott user, you’ll be very tempted to upgrade. The upgrade itself is less than $4 so I suspect many people will go for it. Jott has a variety of plans to choose from including free, basic, pro, pay-as-you-go, etc.

The company based these plans largely on user behavior and lots of data. When they started the company, they knew they would ultimately have a free and paid version, but had to learn the rest along the way. For example, they had to find out if their customers were home makers, road warriors, students, professionals, etc.

Some of the factors they experimented with during the beta program included turnaround times, length of recordings, and features. By collecting data around user behavior and usage, they were able to model scenarios and identify trends. They then used focus groups, the Jott user group, and conjoint analysis (a very cool survey technique requiring users to make trade-offs on product features versus price) to come up with the different packages. They were very confident that some professionals wouldn’t want an ad-supported service, and the research confirmed it.

As you can imagine, they overcame significant challenges along the way. While many users understand that Jott has to put food on the table, there were users who were shocked that a company dare ask for money. Personal note: this is both a common and ridiculous sentiment that has grown as more “free” things pelt us, but that is a conversation for another day.

John and company decided to be extremely transparent about the process and spent significant time in their forums, hitting the blogs, and using other marketing mechanisms to tell their story and let users know what was going on. John admitted they could improve on the communication front, but they did a solid job. The communication philosophy was to tell the users what was coming, tell them when it was coming, and explain why – as many times and in as many places as they could.

The company is very pleased with the conversion process so far. They are apparently hitting their goals and on plan. One pleasant surprise according to Jott is the percentage of people selecting annual plans; John said they are getting 10 times the number of annual subscribers that they expected. I’m not surprised as I’m sure a large percentage of Jott users are business customers, and this is the most efficient way to get something expensed; although this is pure speculation on my part.

John has good advice for other companies embarking on this journey. First, talk to your customers as much as possible. Really talk to them and understand the problem you are trying to solve and how they use the product or service. Second, utilize web-based tools like conjoint analysis to gather quantitative information to make decisions. Finally, try to be transparent and don’t surprise your customers; they hate that. If you build something that people want and value, you can ask them for money and it is good business.