On balancing incentives with good business practices

TL;DR Don’t offer that free day pass.

Starting a new business is hard, it doesn’t matter what that business is. It takes a leap of faith to dedicate time and capital to something new. The process of creation, of bringing an idea from the early firings of neurons to the world marketplace, can be both exciting and terrifying. What makes this process even more difficult is that it’s done in isolation. The public only sees the product after it has been released into the wild. The development, the preparation, the hours and hours of sweat equity that go into getting the business to the point where its ready for public feedback are all done privately. But those efforts are vital and valuable, even if they go largely unrecognized. 

I had a friend & fellow entrepreneur recently ask for advice about a business proposition that was giving her pause. She sells a hard goods product and has worked incredibly hard to develop and grow her business. A rental shop was interested in having her gear available for their customers, which was fantastic. It would provide great exposure and get customers testing her gear out. The caveat – they wanted her to provide it all for free in exchange for that exposure. They, however, would be benefitting from the rental revenue and cache associated with having a better offer for their clients. Was it worth the costs of manufacturing for the chance of brand recognition?

I told her no. I told her not to diminish the value of the core of her business, her gear, by giving it away like that. 

It got me thinking about how I see this same situation in coworking all the time, through free day passes, or free trials. The core revenue generator for coworking is memberships. So why give that away for free? I don’t think we should.

When trying to build a customer base, it’s easy to lean towards doing anything and everything to get people in your door. If someone has never tried coworking, you want them to get a good taste for it and to picture themselves doing it, by actually doing it. However, there is a way to do that without removing the monetary value of what you are offering. 

Free day passes and free trials aren’t loss leaders, they are just losses.

Especially if you are a new space and just starting out, it’s not a good idea to give away anything for free that you’d like to charge for. From my experience both in my own space & from talking to dozens of other coworking space operators, the conversion rates on the freemium model are terrible. Free coworking is called a coffee shop. 

Latte with heart design in the foam next to a laptop
We really love coffee shops

To get customers, keep it simple (but not free).

What can you do instead? Here are a few quick ideas: 

Events

  • Bring people through the door other ways – host events, support meetups, offer space to non-profits. At Cowork Tahoe, for example, we have members that host everything from Women in Networking lunches, Conversational Spanish happy hours, entrepreneur roundtables, and the newest idea, a “Yappy” Hour with the office pups & their owners. We have frequently host local artists & open our doors to the public for gallery nights, which brings in members of our broader community that would otherwise not think to schedule a tour. Our conversion rates for these events is excellent and they are super fun.

Promotions

  • Offer to host a specific Jelly* on a set day in lieu of more broad based free trials. This way, you can target your specific customer segment rather than hope someone will wander your way. We have seen great success with these when focused on something like a Summer break day for parents that work from home or a Freelancer Friday, for example. 
  • Participate in International Coworking Day
  • Create partnerships with other local businesses like hotels and provide a small discount for their clients if they are referred to you. 

Guarantees

  • Upsell, upsell, upsell! Offer to apply the cost of a day pass to any purchased membership.
  • Offer a trial-period with a money-back guarantee. If they hated their experience, the internet went out, they signed up for a membership but can’t stand you after 2 days, then give them their money back without hassle. 

By doing any of the above, the goodwill you are trying to establish is still there, but it goes both ways. A free day is only extending goodwill one direction, to them. Do yourself a favor and recognize that you are inviting them into a space and community you have poured blood, sweat, and tears into. When the value you are providing is clear, it will be recognized by your customers. And that is good for business.

Footnote: I HIGHLY recommend reading Alex Hillman’s post on this topic: https://dangerouslyawesome.com/2010/06/a-case-against-free-trial-coworking/ 

After drafting this out, I did a web search to see who else had an opinion on the topic and wasn’t in the least bit surprised to see that Alex had an incredibly thorough write up on it. 

*If you’re curious about our name, jellyswitch, this should give you a big clue about its origin, but that’s for another post.