Everyone wants to give everything away for free. Thats the way the internet should work, right ? Wrong. Let me change the conventional wisdom a little bit with this :
Free is only good if someone else is paying for it.
We dont want to waste our time with a product or service if its not worth anything. We want things of value, and we dont want to waste of lot of time trying to determine if what is being offered is something we would use or consume. The easiest way to make the determination ? See if anyone else is using it and paying for it.
When we see enough other people actually paying, and how much they are paying, that becomes our “due diligence” and market pricing mechanism. It also becomes part of the decision tree as to whether or not we would prefer a free version , or are willing to pay. For some, it becomes the determining factor on whether or not they are willing to steal rather than pay.
Which translates to the conventional wisdom that free is the way to go on the web as being wrong. I think many websites are making a huge mistake by going free only for their products. The real upside comes from being a hybrid, with both free and for pay versions.
When people actually pay for your product, you define a value to everyone. First you have to keep your paying customers happy. They want their money’s worth. Which in turn, keeps you improving the product and the service surrounding it. Just as importantly, it creates a revenue stream for your company. Always remember this. Without a revenue stream, you have no company.
Of course, you can sell advertising around the product. But while culture of the web is such that most of us understand that if you get something for free, you accept advertising or limited features in return.
The challenge for businesses is figuring out what the right balance of price vs features and advertising is.
At Filesanywhere.com,an online disk storage company, we have a variety of offerings from free to thousands of dollars, depending on the needs of the customer. It works great because the perceived value of the free version is off the charts because everyone knows they are getting a subset of a product that is worth thousands of dollars to corporations. Its a bargain to them when they can start with the free version, see if it meets their needs, and then choose the higher end offerings if they need or want them.
On the other hand, I have tried versions of competitors of theirs, that are offered exclusively for free, and some of the products were good, but the advertising was so intrusive, it wasnt worth the hassle and I didnt have an option out.
The challenge of pricing and product options is going to become more and more complex in a digital world. Because the cost of creating and distributing one more unit of a digital product, whether its a song, movie or piece of software or anything else is essentially nothing , its very , very tempting to want to give it away and generate revenue via advertising or elsewhere. Thats a huge mistake.
Whenever you have people willing to pay for a version of your product. Take their money and return them a great product and value. Not only will that revenue act as a cash source foundation for your company, but it will define the value of your product to those who only want a free version. That in turn will create even more demand for both and leave you with happier customers
3 thoughts on “Free is only good if someone else is paying for it. .”
I read your comments. I placed a value on them. I decided to steal
’em. (kiddin…well…yeah kiddin).
My sentiments exactly.
Shame my programmer is living in an open source dream. Scuse me While
I make him read this..
For sale: one programmer, slightly damaged.
Comment by Gary -
I second that, and add that this is an idea that you rarely, if ever, see in the general media. I’ve many times tried to explain similar notions to people, but, perhaps due to inferior linguistic skills, have never fully summed it up convincingly. Specifically, you may have heard of the SF writer Cory Doctorow, who is a big believer in free content and who regularly gives away over the internet his novel concurrent to their release from a traditional publisher. I could never get people to understand that the only reason people will download his novels from his website is because he also got the money from Tor Books. The fact that his books are put out by a major, traditional publisher, and people are buying copies from Barnes & Noble, *validates* them. Doctorow’s position is that the free downloads sell more books, and he could be right (as long as he maintains a hybrid of paying and free content, but he wants to make the claim that free downloads can drive books sales, when the truth is no one wants to waste time on a free e-book unless it’s been validated by a traditional content provider.
Comment by Rob -
Mark, great observation. I agree 100% and would like to embelish. Not only do free products & services create the perception of no value. Worse, they red-flag consumers to scams.
At Free-Rentals.com, we struggle explaining our pay-per-performance model because of the perception that \”free\” equals \”scam\”.
Comment by Jeff -
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