surfin2u - 1:59 pm on Aug 7, 2004 (gmt 0)

Two years ago I created a regional directory focused on a set of related industries and businesses. It's a one-person operation that pays me enough through advertising sales to live on, but just barely. I've made sacrifices, such as dropping health insurance, cutting out most entertainment, and postponing purchases when I can. It's been worth it in terms of satisfaction, so no complaints here.

I get plenty of positive feedback about the site and effectiveness of the advertising. My lifestyle is enviable, and even though I work long hours almost every day, I also enjoy freedom to choose my breaks whenever I want, and the only boss I answer to is me. The challenge and variety of the work keep it interesting.

The directory has many top search engine rankings and traffic is growing strongly. Search engines, especially G, are the source of most of my visitors. I would be out of business without this steady stream of people they send. PPC won't work for me due to high costs and the wide range of terms that people find me with.

I've added content that has helped get people coming back. I have a mailing list that people are joining to receive my weekly newsletter. I advertise in local papers, although the costs are high and the results aren't very good.

I have a tough problem that I've been struggling with for some time, and would appreciate your help with. I want to convert clients with free listings to paying, and older clients with low rates to the higher, current rates. The problem is how to do that.

I gave away free listings to solve the chicken and egg problem of how to prime the pump, and present the world with a useful, non-empty directory. I gave free listings to businesses that I located online and at trade shows. I planned to make money by selling them upgrades to better listings and more advertising services.

I gave some businesses very basic listings with contact information and a sentence about them. I gave others images and longer descriptions. I added more by scanning their business cards and using the card images as listings. Every listing is a whole web page.

I began to charge low rates in an effort to learn what I would be able to charge. Gradually I raised my rates. I now have a range of clients paying anywhere from nothing at all, to a reasonable fee for the advertising that they receive.

I recently got one of my older listings, who began with very low rates, to agree to pay over twice what he had been paying for the past year. Even with the increase he's still paying less than one third of what new clients pay for the same services. It was difficult to get him to agree to the rate increase. His objection was that even though the new rates are still low, his increase on a percentage basis (250%) was quite high. I replied that at his low old rate, any increase would have to be a large percentage to be meaningful.

I know that some clients are getting plenty of new business as a result of their listings, and others do not. There must be a temptation for some to play down their success, as a negotiating strategy to keep their rates low. The way to tell with more certainty is to see what they're willing to pay to keep the services they receive from me.

If you see another option, I'm interested in hearing it, otherwise these are the three that I'm trying to choose from:

1) Entice all listings to upgrade, and allow free listings to remain free. Limit any changes to "free, introductory" listings to corrections to contact information, but no new descriptions or business categories that would add value. They must begin paying to get that added value.

2) Remove some kinds of information from free listings that won't begin to pay, but allow them to remain free. I could removing images, descriptions, website links, and email addresses, and reduce the number of business categories they appear in.

3) Threaten complete expulsion from the directory unless a purchase is made. Some people will hang onto a freebie forever and this may be the only way to get them to pay.

I stopped giving away listings about a year ago and limited changes to free listings (option #1) about 6 months ago. I never stated how long their listings would remain free when I gave them away. Nobody asked either. Now I refer to them as "free, introductory listings". People will want to know, "What are my options?" when I approach them to pay more or begin paying. I need to have a good answer.

I'm trying to decide whether to go to option #2 or #3. Any presense at all in the directory may deliver many customers, so from listings may not stop or slow down then number of sales leads they generate. Search engines will continue to send people to some reduced listings, even if they only contain a business name, address, phone number and only appear in a single business category.

If I do decide to go with #2 or #3, then I may want to take a cautious approach that would allow me to change my mind if too few freebies convert to paying. I don't want to end up with a much smaller directory. I might contact the oldest listings first or start with the ones that seem to be getting them most business from their listings.

I'm considering a carrot and stick approach, that would offer some sort of discount or extra feature, in return for orders before a certain cutoff date, after which I would get tougher.

Thanks in advance, I appreciate your help.