In the October 2006 edition of Business 2.0, Katherine Heires outlined 9 great tips on how to profit by giving your products or services to your future customers:

Once upon a time, in the bad old days of business, giving away a product without charge was unheard of.

Adobe did it with its PDF reader in 1994, Macromedia with its Shockwave Player in 1995. Both became the industry standard, and those companies were able to make money by selling the products’ authoring software.

In these days of Web 2.0 services that rely on quick customer adoption, the strategy has become so common that VCs have coined a term for it: freemium.

The lucrative flipping of the companies behind Blogger, Flickr, MySpace, and Skype—all of them free services that offer a premium component—has led to hundreds of imitators….we’re talking about companies like Six Apart, which offers its LiveJournal blogging platform for free and has sold 2 million of its customers a premium version, which costs $20 for a one-year subscription…

How can you make a premium service soar? Here are nine tips from the venture capitalists and entrepreneurs.

1. Have a product or service that truly stands out. Its performance, ease of use, and reliability should be superior to those of current offerings.

2. Know your upselling plan from the beginning. Make sure you have at least one paid, add-on premium service up your sleeve. Better yet, have more than one.

3. Once you’ve decided that a product will be given away for free, don’t change your mind. If you make changes you risk alienating customers accustomed to getting your product for free.

4. Access to your product should be just one click away. The fewer time-consuming plugins, downloads…the better.

5. Make sure the major bugs have been exterminated.

6. Harness the collective intelligence of your users…customer suggestions can help speed up product improvements or inspire ideas for premium services.

7. Keep improving the product to give users more reasons to stick with it.

8. Identify a range of revenue sources…MySQL makes money from customer service as well as from fees charged to firms that redistribute the software.

9. Timing is everything. Make sure that the revenue from your premium service soon covers the cost of your free service. Otherwise, cut your losses and move on to the next startup.

Check out these great blogs for more information on this topic:

Offers that Increase Profit and Generate Inquiries

Music Test: Can a Firm Profit from Free Music?

Why Giving Away Your Services for Free Will Get You Business

3 Tips to Make Viral Marketing Work for You