The beta phase is usually an exciting process for software entrepreneurs. The opportunity to fix bugs, experiment with different concepts, fix bugs, and acquire new users help craft a path towards a successful post-launch. It’s opportunities like these that often convince software companies to discount heavily, or in some cases, offer their beta software for free.
Many companies choose to price their betas this way, however, there are several potential risks to this rational and common strategy.
- Beta users will devalue the functionality of your software, which may be difficult to convince them otherwise.
- It can affect the companies own perception of the software in a negative manner.
- It can make it harder to sell the product early on.
When you follow this beta pricing strategy, it can lead to another potentially consequential scenario known as, “chasing your own tail”. This dangerous scenario can cause delays in a launch or increase the cost of development.
How I Found A Better Way
While launching a new SAAS or feature, it can be easy to undervalue your solution. Beta users are not doing you any favors by being involved with the launch. Instead, you should use beta momentum to see if there is an actual need in the market for your product.
My business partner and I started a software company providing solutions for construction companies as our first entrepreneurial gig. We fell for the free beta trap after acquiring some key customers who agreed to become free beta testers. We assumed these major players in the market were going to endorse and purchase our product.
It took some time, but we ironed out bugs, improved the UX, and steadily added new features. Shortly after, our beta testers were sending in a massive list of requests. To keep up, we would have needed an additional team of developers and months of development time to persuade the beta users into subscribing to our solution. Our dream of scaling our company was quickly becoming a never-ending nightmare of custom development.
We didn’t have the necessary budget to develop new features and reached our debt limit. It wasn’t until both of our cards were declined at a brewery in Charlotte, NC that we realized we needed to pivot.
The lesson I learned from this experience is that a beta should be used for testing the market fit of a service and not as a way to acquire low-paying customers.
Don’t Wait To Launch Your Software
We were forced to change our mindset and sell the feature set our software already had, not what it may become. Relying on customers that pay us only if we deliver certain new features wasn’t a path towards success.
We decided to remove all references of “beta” from the software and focused our sales efforts on companies willing to purchase the current capabilities and features. It wasn’t long until we started getting companies to purchase our software. After six months, our capital grew to hundreds of thousands of dollars and we gained quite a few new customers. By no longer offering our software for free, we were able to sign up our first paid beta users.
It was those sales that allowed us to push our development to its limits and add the features our uses considered critical. To further fuel future development, we started charging users for the other advanced capabilities they needed. Instead of using the term “beta” for new features, we started using “Early Access” to improve how customers perceive your software.
It was through this process that we accidentally discovered the secrets on how to successfully launch a beta.
4 Tips To Successfully Launch A Beta
The idea of selling beta software and accelerating growth quickly was a winning strategy. There will almost always be a group of individuals willing to pay for critical functionality. Identifying those users and connecting with them can make a huge difference.
Throughout my decades of experience as a pricing consultant at Software Pricing Partners, I’ve thought about the many downfalls of betas and put together a checklist so others like you don’t make the same pricing mistakes so many companies make.
How To Make Your Beta Launch A Success
- Prove there’s a need in the market: No matter how you started your software, your team should be convinced the software offers a solution for an important problem in a marketplace.
- Generate revenue: Customers are users that pay you for your service or product. Since they understand the value of your software, they are excellent references. A beta should be an early effort for your company to generate sales and determine if there’s a need for a feature. It’s those early sales that will fuel your team’s energy and confidence needed for long-term success.
- Fund your road map: Having fewer customers paying a premium is better than having many customers paying a minimum price. By bringing more value to a few premium customers, you dramatically improve your chances of dealing with similar companies, bringing the opportunity to pivot future management on needed capabilities that will turn your customers into raving fans. By delivering critical features, you improve your chances of selling your software for a premium.
- Solidify the value you provide: When you reach the end of a beta, there are two components you should thoroughly consider. First, what convinced users to pay you? Second, what measurable results did they achieve with your software? Qualitative research is needed to answer these questions and understand if you’ve run a successful beta.
How To Target The Right Customers
Understanding your target market’s needs and choosing the proper beta customers goes a long way towards long term success. A strong beta customer is someone who will pay for access to an early version of your service. An even better customer is someone who will pay a premium for critical capabilities before a public launch.
Companies that typically fit this mold are companies that seek opportunities and want to be ahead of the curve. If you’re going to get your new product off the ground, early adopters must enjoy what they’re using. Doing so will likely mean you’re off to a good start.
Companies with an urgent need to fix a problem your software solves are also strong beta customers. Addressing these customers and quickly showing them how your software solves their problems will be indispensable during your post-launch phase.
Launching and running a beta program that is successful may seem intimidating, but it can be easier with the right beta customers. You will find these customers among your company’s most valuable resources as you work to grow and expand in the future.
Chris is Managing Partner for Software Pricing Partners and former CEO of an award-winning SaaS company. Chris graduated from Miami of Ohio with a degree in Computer Science.