How to Sell Against Free Software

In some market segments, a software company’s biggest competition isn’t a particular company or product at all, it’s a concept.

Open source or “free” software can make competitive positioning difficult for companies that charge for their product, but it’s not impossible to do.

Consumers often use free software because it’s free, not because they loved the functionalities of the product and recognize value in it. I worked with one of our portfolio companies recently to research a particular segment the company wanted to target. We found that the company’s software did a better job at meeting the users’ specific needs and provided the added benefit of compiling all the functionalities into one single platform.

This made their product much more convenient and efficient, which opened the competitive positioning window for us. But the question remained: even though our company’s software was better, how could we compete with the free software and prove our value?

Free is Never Truly Free

Companies facing this situation need to recognize one particular argument and communicate it to potential customers: A lot of free software is “free” if your time is worth nothing. As serial software entrepreneur Rob Walling points out on his blog, when a user spends time trying to make a software product work, or make it do things that it isn’t designed to do, then the cost is equal to the time spent figuring it out.

Customers sometimes struggle equating their time to money, so companies must explicitly show their customers the added value in using their product. Here are a few findings from my research that might help you supersede free products:

Tips for Superseding Free Products

Be Found

Make sure that your product appears in the first few listings of a customer’s search using Search Engine Optimization techniques. You want your website to rank higher than any competing free or open source software company.

Make a Better Product

Free products are usually very basic, containing simpler functionality. They are often stripped-down versions of software that customers would otherwise pay to use. So, make a better product than the free offering and show your customers why it’s better. Highlight distinctive features that solve specific customer pain points that the competing free software fails to do.

Jeremia Froyland’s blog Slashmarks points to one very relevant example: premium WordPress themes. Most WordPress themes are free — but they can also be buggy, faulty, and visually basic offerings. Theme designers recognized that opportunity and began creating bug-free, professionally designed, and much more capable premium themes and charging for them. Not surprisingly, partly because they’re priced right, people are willing to pay for them over the free themes.

Make it Easy to Use

Design and program your software in a way that’s intuitive and user-friendly. Provide a more efficient installation process, too. Customers shouldn’t have to turn to piles of booklets in order to run your program and use its different features. For example, use wizards that explain your applications and guide the customers through them.

Make it Better Looking

Everyone likes good-looking, fun software. More visual users, in particular, will prefer something that appeals to their eyes and appears to be more fun. Make your User Interface look professional, but not drab. The better it looks than your free competition, the more likely you’ll be to distinguish yourself as a better option.

Make Technical Support a Key Selling Point

Free applications seldom offer any form of technical support. So, offer detailed tutorials a few times a week, allowing your customers to log in and ask questions. You can also provide an online chat option. For example, make someone from your tech team available from 9 a.m. to 5 p.m. on your website a few days a week. Show that you really care about your customers and take the extra step to provide real-time tech support. Finally, highlight this in your marketing.

Provide High Quality Customer Service

It’s not enough to simply offer technical support. Software companies must ensure that they’re providing high quality customer service, too. Some customers — especially bigger enterprise users — will look for it. Give them incentives and additional perks for enrolling in your software. You can, for example, make the first two months free as a trial, allowing them to test drive the product before signing up for a longer term plan. Be flexible with your customers’ needs. The ability to work with them will definitely set you apart from open source solutions.

Go Viral

Get current customers to talk or recommend your product. Encourage them to do that by providing special referral discounts and rewards or other perks if their recommendations lead to new business. E-commerce solutions provider Digital River suggests in its Developer Resource bank that the more “fans” a product has, the more likely it is to hold a competitive advantage over an open source rival.

Flaunt Your Expertise

If you’re recognized as an industry expert, it will do wonders in helping you develop credibility and a trusted brand. Develop a content marketing strategy that will allow you to provide helpful advice in forums, blogs, newsletters, magazines, and social networks. Case studies that speak to particular customer or prospect pain points are useful tools, too. That expertise shows the customer that you have a deeper understanding of their needs and will be much more capable of addressing them.

Competing against open source or free software isn’t easy. There will inevitably be groupings of customers that choose free products regardless of the benefits you can provide. But it’s not an impossible task to convert everyone else.

While it’s not a software specific example, Froyland suggests software companies can model the pay-for-service approach of premium cable providers. HBO goes up against a litany of free cable television options. Yet, every year, HBO attracts new customers with a high quality, visually appealing product that’s buoyed by excellent customer service (no commercials).

The most important thing to keep in mind is that even free products have the cost of time. To so many software users out there, time is an incredibly valuable asset in today’s world. So, make that point to the user. After all, nothing in business is ever truly free.

Faria Rahman
Faria Rahman

Faria Rahman is the Co-Founder of Treemarc which, uses machine learning to make it easy for businesses to order custom packaging and product nesting in a few minutes. Previously, she was a Senior Associate at Northbridge Financial Corporation, a leading commercial property and casualty insurance management company offering a wide range of innovative solutions to Canadian businesses. Faria also worked at OpenView from 2010 to 2011 where she was part of the Market Research team.
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