When I read Chris Anderson’s book “Free: The Future of a Radical Price,” I found it insightful and thought-provoking. His basic premise stems from a supply and demand context:
- Supply: Costs are going down dramatically. The marginal cost of delivering information is close to zero.
- Demand: Consumers behave radically differently for a free product than for bought products, even if they only have a small price.
The demand side is what I’ll focus on in this article.
Free has many different meanings. “Buy one get one free” is quite different from a free sample. A free sample is Genuinely Free, whereas “buy one get one free” is really a 50% off offer. Genuinely Free is just that – something you can get without having to open your wallet. It’s so attractive in that it feels like we get to have something without giving anything in return at all. (However, this is merely a perception – a customer may ‘give’ in other ways to use the product, such as through time, energy, data, etc.)
Free is one of the most powerful words used in marketing, and it is used in so many different contexts. There are free trials, free TV and radio (if you watch the commercials), free “lite” versions of software, blogs, free email, and more. However, note that not all of these are Genuinely Free.
If We Want the Windfall of Free, We Need to Offer Genuinely Free Products
I can think of four reasons a company would offer a product or service Genuinely Free:
- Altruism: this person or company wants to help others.
- Trial: free samples will allow someone to try your product, and you’ll hope they will purchase it later.
- Exposure: writing blogs and giving away valuable information is typically done to build a reputation for the writer. The hope is that when the readers need something related to the topic written about, they know where to turn.
- Build a network: some businesses are more valuable to the customers when there are more users. For example, platforms like LinkedIn and Facebook require millions of users to be successful. By offering a great deal of value for free, they build their network, and they can make money by charging for more services. They also sell advertising.
In each of these cases, the focus was on the giver. Why is the business giving something away? Because they get something in return. (In the case of altruism, you feel good knowing you helped others.) The great thing about each of these is that although the giver gets something, the receiver gives almost nothing. Thus, they are Genuinely Free.
Here’s what I mean by “almost nothing” – although many businesses offer products for “free,” nothing is actually free.
For example, advertising-based business models are pretty close to free. The customer is exposed to advertising in exchange for receiving entertainment or information on TV, radio, or the Internet. The customer doesn’t pay to use the product, but they ‘pay’ by way of having their attention diverted to advertisements.
Free 30-day trials of software seem free, but they aren’t. The user must invest the time and energy to become proficient with the software package, which will be taken away in 30 days if they don’t buy it. This is different from a lite version of the software, which is Genuinely Free. If you go to the iTunes App store, you will find thousands of Genuinely Free apps. The providers of these applications are, of course, hoping you will upgrade to their full version. Giving away the lite version costs them very little when compared to the reward they receive if you upgrade.
Free is a powerful word. Unfortunately, it is sometimes deceiving. There is nothing free when you have to “buy one to get one free.” Consumers are savvy, and they quickly see through these tricks. If you want the impact of free, make it Genuinely Free.
The action you can take today.
Can you think of something you can give away for free? Genuinely Free? Which of the four reasons listed above can you use to justify your Genuinely Free offering?
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Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.