It’s Not About “Free”

by Sharlyn Lauby on April 15, 2010

I don’t know about you guys, but I feel the business landscape changing.  With talk of a rebounding economy, companies are looking for ways to jump start business.  People are looking for ways to stand out in a crowd.  2009 is so “last year” – it’s about the future.

As such, one of the things I see businesses evaluating is their pricing structure.  How much to charge for their product or service.  Whether or not certain products and services should be offered for free.

Not long ago, The New York Times announced that they will start charging for access to their online content (starting in 2011).  Users will have a certain amount of access to free content and after that limit is exceeded, they will be charged.

This is not a unique concept.  Pandora Radio did something similar last year by giving listeners “free” internet radio.  And, once you exceed 40 hours of listening… you’re charged a small fee ($1).

People have been debating for years the value of giving away products and services for “free”.  A few months ago, Seth Godin wrote a post about the strategy of free versus fee.  It’s a really good read (but, isn’t everything by Seth?) and speaks to what we’re currently experiencing in this world of instant access to news and information.  You can check it out here.

As I see it, there are two angles to using free as a strategy:

  1. You can give something away for free because people won’t pay for it.  Either because there’s so much competition keeping the price ridiculously low or because people view it as an entitlement – that should be free anyway. It will be interesting to watch the NYTimes scenario.  Is “the news” as we know it considered information worth paying for?  Or is news an entitlement that people feel should be free?
  2. You can give something away in the hopes people will like it and pay for the other things you offer.  IMHO, if you use this strategy, then your free offering better be decent and provide some value.  In addition, the service/product you want people to pay for has to be unique and awesome.  I can’t imagine anyone buying something that doesn’t meet their needs just because they get a mediocre product/service for free.

Offering things for free can definitely be a sound strategyIf the things you are offering are valuable.  And, you have a clear understanding of why you’re offering it for free.

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Benjamin April 15, 2010 at 3:55 pm

I think both concepts that you refer to at the end. Those that offer services for free will do so in the hopes that the ‘Free’ they offer will be rewarded by profit. Either by the consumer or by an advertiser. Look at Google, their whole structure was initially based on this.

As consultants there is always a give and take in the hopes that eventually the ‘take’ that a client does rewards us with the ‘give’ of profit, fees and most importantly – HOT REFERRALS.

http://ReThinkHR.org
@BenjaminMcCall

Sharlyn Lauby April 15, 2010 at 6:44 pm

I agree. Both are usually done in the spirit of long-term gain. Thanks for the comment!

Marsha Keeffer April 15, 2010 at 7:40 pm

Free can be a great strategy if a company knows how to harvest all the goodwill it creates. At some point, you’ve got to collect – whether from the client or, as Ben pointed out, from advertisers.

It has to be real – not just a come on.

George LaRocque April 16, 2010 at 1:57 am

GREAT post. I think a lot of vendors are struggling with new buying habits demonstrated today. User/buyer expectations have changed so much with the advent of things like Google Apps, Twitter, LinkedIn, FaceBook, etc. etc.

Your two scenarios for free are dead on.

Most vendors don’t have, or can’t afford, the patience to see an approach that puts value first and revenue pressure second. Which makes “free” a really challenging concept for most – resulting in most free offerings being stripped of value in hopes of an upsell…

My 2 cents. Again, great post!

Sharlyn Lauby April 16, 2010 at 10:20 am

@Marsha – So true. At some point, the free strategy has to pay off or you’re just slowly going broke. Thanks for the comment!

@George – Thanks for adding to the conversation. I think your point about how long can you wait for the free strategy to pay off is very valid. Adds an interesting twist to the dynamic.

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