Transitioning Services from Free to Fee – How Social Networks are Making it Work

What would it take to convince you to pay for services on Facebook? What about LinkedIn? Or Classmates.com?

In today’s world of “try now, buy later” premium models, it’s harder than ever to sway social networkers to upgrade to premium services. There is certainly a recipe for success, but what is the secret to creating a win-win scenario for both the user and provider?

Dutch professors Marlene Vock, Willemijn van Dolen, and Ko de Ruyter attempt to answer this question in a recent article Understanding Willingness to Pay for Social Network Sites published in Journal of Service Research. According to their research, social networkers’ responses to premium service offers differ depending on whether they have already paid for the service before, and whether the site is socially or professionally focused.

Take Classmates.com, for example. For a social site like this, the study concludes that nonpaying members are much more likely to respond to premium programs that convey economic value, while paying members prefer to see social value from the service. Classmates.com, in particular, offers its All Access Pass to enable direct messages and provide more in-depth information to help users get in touch with old classmates. For those looking to re-connect with their high school sweetheart, or that brawny basketball player from algebra class, the All Access Pass may just be worth the price.

By contrast, professional networking sites, like LinkedIn, will have the most success converting nonpaying users to premium users if they highlight both the social and economic benefits of their service for everyone, regardless of whether or not they pay for services on the site already. LinkedIn’s paid service, LinkedIn Premium, has three price tiers that offer varying service levels for members who would like more detailed search, higher visibility, and the ability to communicate directly with people far outside their network.

“LinkedIn is already on the right track, considering it is marketing its LinkedIn Premium service in such a way that helps members recognize the site’s integral role in building relationships and providing economic value, with its job search functionality,” notes Mary Jo Bitner, Professor of Marketing and Executive Director, Center for Services Leadership at Arizona State University and Editor of the Journal of Service Research.

Logically, it all makes sense, but there are more pieces to the puzzle, as the researchers point out. Professor Vock highlights social capital and “entitativity” as the important factors that affect customers’ willingness to pay for professional social networks: “The best way to organically increase premium subscriptions is to foster a community with strong feelings of “we-ness” emphasizing group solidarity and the enjoyment of interacting with others, in addition to stressing potential economic advantages.”

So, what does this look like in action? It’s all about finding the aspects that emphasize members’ common ground. Users want to know if someone went to their same university, or grew up near their hometown. There’s nothing better than sharing common memories and swapping stories about old music and fashion trends (which were mostly fashion fiascos). LinkedIn is the perfect example of this, essentially highlighting mutual friends, or acquaintances, with its “Shared Connections,” and asking members for basic information like their educational background.

“Creating niches within larger social networks is also smart, because it creates special interest groups where people can come together, which creates a more purposeful network,” says Professor de Ruyter, another researcher from the study.

Considering how far social networks have come in the past decade or so, there is no telling how far they’ll go in the next few years. Regardless, there is something to be said for joining premium services in the social networking world. It may be hard to picture paying a fee for something like Facebook or LinkedIn now, but with improved services and honest, effective marketing, it might just become the norm.

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For a limited time you can access the article Understanding Willingness to Pay for Social Network Sites online. The full article will be available on the Journal of Service Research website till October 31st, 2013.

The Journal of Service Research is edited by Mary Jo Bitner, Professor of Marketing at the Center for Services Leadership in the W. P. Carey School of Business at Arizona State University, and published by Sage in Thousand Oaks, California.

Kristie Dickinson is a B.S. candidate in the Carroll School of Management at Boston College, a blogger and Editorial Assistant of the Journal of Service Research, where she has worked with Prof. Katherine Lemon, the former Editor of the Journal of Service Research and Chair of the Marketing Department at Boston College. She currently works in marketing at Apple, Inc., based out of Cupertino, CA.

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