Everyone wants to give everything away for free. That’s 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
don’t want to waste our time with a product or service if it’s not worth
anything. We want things of value, and we don’t 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. It’s 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 wasn’t worth the
hassle and I didn’t 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. That’s 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.
