Marketing
Atomz responds
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20 Jun 2003
I had a nice email exchange with Isaac Newton from Atomz sales and Mike Thompson, Atomz’s CTO and co-founder today. Apparently my recent missive on Atomz’s wasted marketing opportunities was passed around the company yesterday. What I discovered is that the free service offering isn’t a marketing blunder, but rather a generous decision to continue supporting legacy users after the companies business model changed.
When Atomz first launched, the focus was on providing search tools to small and medium businesses with prices ranging from free to $1000 per year. Hundreds of sites a day signed up for the free search service, quickly giving Atomz tens of thousands of users, both free and paid. The free search engine was designed to provide users with an introduction to the paid service. As people discovered the limitations of the free services, Atomz hoped that they would transition to being paying customers.
Like many other companies, as the tech economy started to slide and the VC money dried up, Atomz found that most of their free users were unwilling to sign up for paying accounts. People receiving a free service often place no real value on the service, and there are plenty of substitutes on the market. Someone using a free search service often doesn’t care very much about the quality of their search results, so they have no problems with switching to an inferior service. Mike Thompson told me that “despite the fact we had tens of thousands of customers using our free service, any effort on our part to get a portion of our free customers to pay for the service simply chased them to competing services — even if the alternate was an inferior product.”
Most companies, when faced with this reality, change their focus and begin to market to higher value clients. They alter their strategy to provide services to the enterprise market because that market has money to spend and understands the value of what they are getting. Atomz pursued this strategy, choosing to focus their product on the needs of their existing enterprise customer base. This allowed them to increase their pricing and sell into companies that were willing to actually pay for the product.
Initially Atomz tried to continue selling their low-end search product alongside their enterprise offerings. What they discovered was that the high-end customers they were targeting would often choose to purchase the products that were aimed at the low-end of the market. The features were just too similar. “We would have to cut so many features from our low cost search offering it was no longer competitive or we would be unable to sell our higher cost services because of the quality and features in the low cost product. Customers would typically choose the least expensive option even if it didn’t always suit their needs and our low cost products prevented us from selling our higher priced products at a price point that actually supported our company. “
So Atomz decided to stop marketing their low cost search products and sell exclusively to enterprise customers. When most companies do this, they notify all their free customers that they are discontinuing the service. Sometimes they suggest alternative services, but many times the just kick their free users to the street corner. What Atomz decided to do was different. Even though there is no legitimate business case for doing so, they continued to allow existing customers to use their free service. They also grandfathered in all their paying customers and continue to provide them services at their existing pricing levels.
Atomz decided to show some loyalty to customers that had been with them in the early days, even though they make very little money off those customers. Mr Thompson says there are “more than 60,000+ customers who continue to use our free search service. Providing server space, bandwidth and technical support to these customers is not a trivial cost and adds up to a substantial amount of money each month. Admittedly, the viral marketing we get from these customers is not ideal because very few are ever likely to upgrade to our current price points from a free service. However, we feel it would be wrong to simply yank the service from these customers and we kept the service going even at times of great fiscal belt tightening elsewhere in the company. We greatly de-emphasized our free service on our web site, but we do continue to offer it to those who may find it useful and we have every intention of doing so into the foreseeable future.”
That’s a refreshing viewpoint. Treat your customers with respect. Eventually Atomz may start offering a lower priced search service. When they do, they have 60,000 potential customers who are already familiar with the product. And even if they don’t, they have 60,000 people who are familiar with their brand. One of them might be managing a site large enough to require the search, content management, or promotion services that Atomz provides.
So if you are using Atomz search currently on your site and you fall within the 500 page limit, continue using the service. You are getting high-end search services for free.