I have long been a proponent of the Free To Paid model of software subscription sales.  For those unfamiliar with this model, you offer a free product coupled with value added upgrades available for a reasonable fee (usually charged either monthly or yearly).

The Free To Paid models offers the best of both worlds when it comes to customer acquisition, retention, and monetization.  Users are offered a reasonable set of features for free, and are gently but persistently encouraged to upgrade their memberships to receive even more value.  Paid members who wish to cancel their memberships can usually be encouraged to maintain the free membership, which maintains your active user count (critical to investment valuation) and offers you the opportunity to re-upsell them to a paid membership.

Developing a successful Free To Paid subscription program takes planning.  You want to give away enough to make your service enticing, but not so much that you lose the value of upgrading the membership.  Once you’ve given away a feature, it is extremely difficult to charge for it without creating consumer animosity.

Plaxo recently encountered this when they removed their data sync feature from their free membership program, and made it available only to those who have upgraded to the Paid Premium membership.  To be fair, they did give some notice to the users, in this case 9 days.  And they offered a 20% loyalty discount to those who upgraded to the premium membership.

But even a few days notice can leave a bad taste in the mouths of consumers who have grown accustomed to using a feature or set of features for free.

Modifying the product / feature offerings for various levels of membership (free or otherwise) is a process that all subscription software companies face at one time or another.  How you manage this process can mean the difference between success and failure in the court of public opinion.

Aside from not offering these features for free in the first place, there are many things Plaxo should have done differently in this situation.

• Rather than removing these features from the free membership, Plaxo should have looked to add more value-added features that would make the paid Premium membership more appealing.  For instance, the ability to schedule syncs times.
• Instead of removing the Sync feature all together, Plaxo should have opted for a one-a-month sync option for free members.  Or perhaps only allow 100 contacts to sync at any one time.
• Alternatively, Plaxo could offer free members sync options only at specific times of the day.  Not an ideal solution, but certainly better than removing the functionality entirely.
• Ad based software is very common, and accepted, for free memberships.  Providing an ad with a call to action (Would you like to learn more about this offer?  [YES]  [NO]  ).

You can always add more functionality to a membership, but removing it is extremely difficult without risking a “bait and switch” syndrome from your loyal userbase.  Proper planning is essential when developing any subscription based revenue model, especially those that rely on the Free To Paid model.