I'm going to use absolute terms below, ie. never or always. I realize that there are edge cases, but I'm not going to bother addressing those. They will always exist & they can be wildly different from business to business. I'm going to sound cranky cause I wrote this right after I woke up this morning. You've been warned.

I think your premise is flawed & would go so far as to say there are aspects about your business that you don't fully grasp.

1. You don't understand the freemium model. With freemium services that succeed, the free option offers features that cover a majority of users, but are still limited based on cost to the provider. The paid tiers are priced to cover costs of providing increased limits & additional features, while staying under or matching customers' expectations of price. I'm not saying all freemium services work this way, but tons do. And I'm not saying you don't know they don't work that way, but I don't think you understand how it applies to your business. Which brings me to the next point...

2. Paid features must provide true value. Not artificial value that's generated by offering low-res versions of your product for free & high-res if I pay, but features that actually increase the worth of your service to me. My kid isn't going to care if he gets a low-res letter, so why should I pay for a high-res one? With payment, you have to provide meaningful value. Your site idea of value is giving me a letter template on a single background with 3 color choices, along with a door hanger & an envelope. This is 2011 and if you want me to pay for that, you'd better provide me with some fancier premium backgrounds & a color-picker. Oh...and there are different printing/packaging options. And you're mailing it to whoever I want it sent to with a return address located at the North Pole. And the folded letter or envelope has Santa's fancy wax seal on it. And it smells like an elven woodshop. Now THAT letter from Santa? Yeah...I'd buy that...and I'd buy 10 more for all the other kids in my extended family. And I'd tell everyone I knew that had kids in their lives about it, as well as share it on every social network I'm on. Cause THAT letter from Santa kicks ass!

You know what...I had more to comment on, but screw that. I'm going to go build my own Santa letter generator right now that does all that and more. And I'm going to start taking order in the next two weeks.

Actually, no...I need to finish coding my freemium startup's prototype. But expect good competition next year, cause I just told everyone how to beat your current offering.

3. Know your customers. You say you had a good design. I'd say it's just ok. It's about on par with sites made 5-10 years ago. To be honest, I'm not used to using sites that require multiple page loads to customize stuff & that don't provide a live preview of my changes. Also, I'd take a look at how much time your users spend on your landing page, cause I'm betting a lot of that text that's mucking up the space around your big red button isn't being read. Take a look at services that have launched in the past year for guidance on how to improve your design. Oh...and get a designer to handle the improvements.

4. Customers will mark your email as spam. Period. If you want to minimize that, make sure the people that will label you a spammer never get a single piece of email from you besides a receipt. One way to do it is to put subscription links in good spots, but keep them out of the standard purchase flow. Foolproof? No. Better than winding up on blacklists? Totally. Your email list won't grow as quickly as opting people in through a privacy policy (which is just...ugh..."here's my privacy policy you have to agree to, wherein I tell you how I'll intrude on your privacy"...really?!), but this ain't about you. This is about your customers who are complaining either by communicating directly with you or by pressing that "Spam" button. Providing customer service means you do what you can to make your customers happy & satisfied with as minimal negative emotional periods as possible. Not having to worry about customer service means you don't give them an opportunity to get upset cause they're already completely taken care of.