5 Steps to Turn an Ad-Supported Product Into a Paid Subscription

By | Small Business

image

When we started Enplug in 2012, we didn’t think that businesses would pay for our software over our competitors’ free solutions. Our initial business model was to make 100 percent of our revenue from advertising, which caused plenty of sleepless nights. Now, it’s 5 percent advertising and 95 percent software subscriptions.

Our product is a plug-and-play mini device that turns digital displays into a marketing tool for high foot-traffic venues, with an App Market that lets businesses show live social media streams, news feeds and more on their displays. And six months since product launch, we now receive about 60,000 new posts each day across our network.

But it was a trip to get here. If you find yourself in a similar place when beginning your company, here are a few things to try.

Take a Guess at What Customers Want

From your market research and your customer surveys, what recurring themes did you see? You can dwell for months on what that solution might be, but the quickest path to the best solution is to guess and test.

Begin your startup journey by thinking small — how do you make just one business owner really happy? For us, we saw that the existing model for digital signage companies was a focus on ads on the display, which consequently ignores the in-store experience. So we focused on building a product that would improve that missing factor. The key was engagement. We took a guess that showcasing live social media posts from the store’s shoppers on an interactive display would encourage shoppers to tell their friends about the great time they were having at the store.

Get Non-Paying Customers First

You have your hypothesis and now it’s time to get 50 relevant test customers to try it for free in exchange for sharing their experience with you. Test your theories with relevant audiences, offering your product for free as much as possible, and see how consumers engage with your brand.

To test our own hypothesis we asked restaurant owners if they’d let us install our display in their restaurant for free and show advertising to cover our hardware cost. We ended up selecting 100 beta test users and tried it out. Our tests offered positive results for both us and the businesses with an increase in the number of social media mentions — so now we knew how to move forward.

Ship It and Reiterate

Quickly get a demo product out to your test customers. Each week, make changes based on the feedback you receive.

I’ve been told to refrain from launching a product until it’s ready. But I don’t think that’s the best advice. After 100 beta customers, we continuously signed new customers, and wouldn’t have had the success we did without continuing to ship and gaining their valuable feedback. Just make new updates a daily routine and ship as soon as you can.

Get One Paying Customer

Which of your 50 beta customers enjoyed the product the most? Once you identify a few, go and find a potential customer that’s similar to them. Your goal is to convert the potential new consumer into a paying customer.

For us, this happened through someone seeing our free displays — a restaurant owner said they’d seen one in a friend’s restaurant. The restaurant owner then asked, “How much for an Enplug display?” This was the exact moment that catalyzed our path towards charging for software. We then tested the waters by pricing our software quite low.

Adjust Your Prices as You Go

It’s easier to start prices low and build upwards because it demonstrates growth in value proposition to customers. Work on polishing your product, and then evolve your prices. Add new features and raise the costs as you go.

Two years of learning experiences – mistakes — later, we have over 400 companies that use Enplug software to power displays. And while we started out by giving away TVs and only making money from advertising, we now only provide the software.

The trick is to continue to stay flexible as a team, acknowledging that you don’t have all the answers. As you receive honest customer feedback, adjust your assumptions accordingly. Since our own inception, our business model has changed three times already. The biggest lesson I learned was to test our product while also testing our business model.

Last month, we got an email from Europe about getting our product overseas. So our next exercise? Being even more flexible and adding yet another feature — teaching Enplug software to say “Bonjour! Hola! Konnichiwa!”

Nanxi Liu, is the Co-Founder and CEO of Enplug, a Los Angeles technology company that builds the industry-leading software for that powers digital displays in malls, restaurants, retail stores and more. Nanxi is also founder and board member of Nanoly Bioscience, which developed a polymer that enables vaccines to survive without refrigeration.

The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses.

Subscribe to our mailing list
* indicates required
Small Business Services