Home Making the Move to a “Premium” Service

Making the Move to a “Premium” Service

After many months of rumor and speculation, Hulu announced yesterday that it will be launching a subscription service. Hulu Plus will give users access to more content on more platforms for a monthly fee of $9.99. And while it’s surely not the most reliable metric, early reviews from the App Store indicate that some folks aren’t too pleased with the change. The app (which is free) has a whopping one star rating, and the service itself has received mixed reviews.

Of course, some people are going to grumble about a switch from a free to a paid service, no matter what you do. And it does tend to be difficult to convince your customers to suddenly start paying for something if they’ve become long accustomed to receiving it for free.

Pricing your service is an crucial consideration for a startup. If you find yourself moving towards a “premium” service, here are a few things you can learn from Hulu and other companies who’ve tried just that:

1. Give your customers ample notice. Make sure you inform your customers ahead of time about any plans to change pricing. Better yet, provide customers an opportunity to give (real, meaningful) feedback. When Ning announced the end to its freemium pricing model in April, for example, many customers felt “thrown under the bus” with the end to free Nings without any notice or input.

2. Continue to offer something for free. Adding a premium service doesn’t mean that free service need necessarily be terminated. You can still watch Hulu for free on your laptop, for example. (Typically this free service is supported by ads that are then absent in the premium version. Hulu, it seems, did not get this memo.)

3. Be as transparent as possible. When online education marketplace TeachStreet started charging for its services, communications of the change were sent to users via email, and a blog post written by the CEO Dave Schappell spelled out the company’s rationale. There were some bitter comments on the blog, to be sure, but it provided an opportunity for the company to clearly and openly articulate its vision.

4. Launch the fee as you launch a new feature. Customers are less likely to be ruffled by fees when they believe they’re getting more for their money. True, there may be no perfect time to roll out price hikes, but a good time is in conjunction with a new feature or service. In the case of Hulu, that’s access to more TV shows and movies and access on mobile devices.

The rumors have circulated for quite some time about Hulu’s plans for a subscription model, so arguably the company succeeded in transitioning slowly. Whether their move to a premium service will be successful, however, remains to be seen.

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