The pros and cons of offering freeware
Every business, big and small, will make use of third-party software tools. Among these software tools will be some freeware solutions. Free-to-use software is a boon to small businesses starting out, and a useful resource for bigger businesses with many functions in need of completion.
As a software company, though, what are the benefits of offering your product for free? While there are obvious financial upshots of freeware for the end user, the rewards for the unpaid supplier are more abstruse.
So, what are the ins and outs of offering freeware, and is it worth it for businesses?
What is freeware?
Freeware is what it says on the tin: software that is free to use. Unlike open-source software, freeware doesn’t come with its source code. This means that the vendor behind the solution is offering the intended use of the program for free; the secrets of its code remain unavailable. You can’t edit it, build on it or change it.
There are several different types of freeware, the most common being ‘freemiums’ and ‘shareware’. Freemiums are freeware programs that you offer with limited functionality. They’re used to promote a premium or paid upgraded version of the program. Shareware, meanwhile, is freeware that encourages users to share your product. So, you get your brand name out there in the market you want to penetrate.
But developing software takes time, money and resources. Why then would you want to offer it for free?
Freeware pro — spreading awareness
Offering freeware is a great way to spread brand awareness and authority in your targeted sector. The lack of monetary costs to the businesses downloading your freeware creates a low onboarding barrier. So, more businesses are likely to try out and endorse your program. The result is more businesses learning who you are.
For this reason, freeware is a great way to drive early adopters to your site. They’re more likely to take the risk of adoption if you remove the monetary risk. So, if you have a new, innovative B2B software tool, offering it up as freeware can help you acquire a user base quickly and smoothly.
In fact, releasing freeware can generate new users and open space in the market for your later paid projects. A big-name example of this tactic comes from Google in response to Apple’s mobile phone sales. By releasing their Android operating system for free, other companies could create cheaper handsets. This made mobile phones more accessible to lower income users. So, there were more users, which created space within the market.
Freeware is integral for smaller businesses with fewer resources to spend on tools. By offering freeware, your business supports these small businesses. You start to build a relationship with them through your lightweight software. When that small business grows to need a more heavy-duty solution, your paid solutions are waiting in the wings. And, with your existing relationship with the business, you have a competitive edge over other vendors.
Freeware pro — benefits your paid product
This leads to the next point: releasing and supporting a freeware option often benefits your paid version.
As with freemiums, freeware can promote a paid solution that you offer. It gives businesses a taste of what your program can do for them. So, you prove the value of your paid product, enticing businesses to pay for your full version. They know that your product will benefit them.
Freeware can also be used to glean useful insights from real users. It attracts customers in your target market, who you can then ask for feedback. That feedback can help direct the development of your paid software or even your business growth.
When you release your paid solution, then, you do so knowing it offers the features and functions most valuable to your target market.
Is there a downside?
So, it all sounds good, but what are the downsides to offering freeware?
Firstly, there are costs to offering freeware that you need to consider. The most obvious of these is the cost of development time to make your free solution. It takes substantial effort to make a software solution. Then there’s the cost of marketing your freeware. Not to mention the costs associated with maintaining it and keeping it up to date. This can all add up.
It’s also worth noting that some of the freeware benefits are reliant on external factors. For instance, it can take time (and trial and error) to create the right balance of free vs paid features in a freemium offering. Too many valuable features offered for free means no one will pay for your premium. Not enough offered for free, and no one will bother with your freeware.
Plus, there’s no guarantee your free users will upgrade, buy your services or subscribe to your other tools. And that’s even if you do get the balance right. Freeware also isn’t useful for feedback if the free users you attract aren’t representative of your target demographic. (Though this might suggest a better target audience for your paid solutions.)
Finally, there’s always a chance that your product will be perceived as inferior to its paid counterparts – purely by nature of its price tag. How good can your product be if you’re giving it away for nothing? If it’s true that people don’t value what they don’t pay for, you may risk being relegated to a second-rate rank in user minds.
How do developers make money from it?
So, we know the pros and cons of offering B2B freeware, but how can you make money from it?
One way you can harness the power of free to make money is known as the razor and blades model (attributed to King Gillette). The model sees a commodity (such as a razor handle) offered for free, and a consumable or complementary good sold separately for a price. So, with freeware, for example, the software is free to use but the support or updates for it might come at a cost.
Freeware can also be used as part of free sample marketing. This is using your freeware to promote your paid solutions, much like your free trial. Freeware is different from a free trial, however, as it generates interest as well as promotes sales. (Whereas a free trial happens when a customer business is already interested in your product.) You’re essentially using your engineering as a marketing tool.
Generating income with a freeware solution just takes some creative thinking.
Freeware wouldn’t exist for businesses to use if it didn’t somehow benefit the business that developed it. And there are many benefits to gain from offering freeware.
The key to offering freeware is to be wary of the potential costs and to have a plan or purpose behind its release. When managed correctly, there’s no reason that the costs of offering freeware need to outweigh the gains.
Note: we originally published this article here: https://www.itchronicles.com/software/the-pros-and-cons-of-offering-freeware/