So Ning is about to make users pay for their service. Bummer. Check out Sam’s post (link here) to see why this move is lame.
My personal gribe with this whole fiasco is that I was about to build an internal Ning network for a project I’m working on. Now I find myself asking “how can I convince people to pay for what they thought would be free?” Well the answer is I’m not even going to bother. I’ll find an alternative that doesn’t cost anything and use that instead. Continue Reading »
Giving up on free and pushing prices on people who signed up for a free service – this just stinks of a CEO who lacks creative business thnking.
Looking through the comments on a lot of the articles about this “interesting” strategic move two things are clear:
- People understand Ning needs to make money.
- Almost none of them think that giving up on Free is the best way to do so. Continue Reading »
For sometime now Ben Young aka Bwagy has been prompting me
to think about the how exactly you would go about justifying ‘Free’ to your shareholders. I can honestly say that I struggled with this idea, so to put this post together I’ve collaborate with Phil Osborne – enjoy.
What do shareholders want?
Excitement , a ridiculous return on investment and absolutely no risk….
Pretty reasonable, but maybe just a tad unrealistic. In my past role at a financial planning company it was self-evident that all investors really want is ‘peace of mind‘. They want to know that they’ve backed a winning horse and that everything is going to be all right.
So how do you give them this peace of mind?
It all depends on the business model…
If you were pitching ‘Free’ to Google shareholder you’d have a simple 3 step process:
- The more free products/services we make that enable people to generate content
- The more advertising space we have/the more adwords get clicked
- You’ll get more $$$ + a more stable your investment.
For a traditional business selling widgets it’s generally a be trickier, however the same 3 step process can still be applied:
- We’ll give away something (a platform) that results in enhancing the consumers experience in your industry
- We’ll set up a process to make sure that you are able to collect revenue (directly or indirectly) as a result of this increased user experience/involvement in your product area
- You’ll get more $$$ + a more stable your investment.
But we’re not Google, we can’t afford to give our products away…
For most small business (esp. service business) the marginal cost of an additional client = $0.00, therefore by judicious use of ‘free’ you can tempt new clients to try your service.
So let’s say you’re a hairdresser….
- Assuming your salon is open six days a week
- Costs are pretty much fixed, wage, rent etc
- So even if no hairdressing done costs stay pretty much the same
- Therefore having a day when appointments are free, adds little cost to the business – especially if it’s the traditional ‘quiet day’
- This allows the barriers to entry to be lowered and supercharges Viral Buzz
While obviously there will be ‘product’ costs, this could very well be offset as marketing expense – consider what an ad in your local paper costs. Best of all ROI can easily measured by the conversion rate of free trails that convert into paying customers.
Ok, so not everyone can give away free haircuts, some products are just a bit more expensive. In such cases it might help to…
- Work out where you really make your money
- Separate your service into high and low profit areas
- Then think about giving away a portion of the low profit part of the service, in order to encourage people to start using the high profit product or service
Telco’s understand Free very well – giving away mobiles so that you sign up to a 24month contract is absolute genius – I know it’s sucked me in at least twice!
Loading ...
Last week I wrote two posts about ‘Free’ & Viral Marketing , the first was merely questioning whether free was necessary for viral 
marketing to work, the second simply shed some insight that came from discussing the first post with a prominent Kiwi Blogger. This is the follow up:
After all this discussion what was the consensus?
Free is not 100% necessary for viral marketing…but it sure does help.
‘Free’ certainly lowers the barriers which prohibit viral activity, but it’s likely that you can still have viral activity whilst charging a price. A somewhat obvious and simultaneously abstract example is the chain letter e.g. You send $10 to 25 friend asking them to do the same, in exchange for the prospect of thousands of dollars coming back to you, if both your 25 friend and some of their friends all do the same all of a sudden thousands of dollars have been exchanged in a viral interaction.
Ok not everyone will buy into this crapy form of scam marketing but it upholds the point that viral messages do spread even when the cost is not $0.00. Free is not necessarily a prerequisite for the viral effect, but tiz perhaps the ultimate acceleratant.
The fundamental idea behind viral marketing is that value of spreading a message must always be greater than the cost associated with spreading it. Which means that because there is always time involved in spreading a message, and time=$$$, the cost of spreading a message is never truly ‘free’. Therefore people will spread a message if the value of spreading it significantly out weighs the cost of spreading it. – Viral interaction’s natural foundation is value!
So perhaps instead of using $0.00 to gain the benefits of viral growth – you could focus on adding overwhelming value to reward sharing and reducing other costs (such as time).
If you’re looking for a great overview of viral marketing check out David Meerman-Scott’s white paper and if you’re interested in ‘Free’ then check out Wired Magazine’s Repository on $0.00. Oh and if you haven’t yet read it Chris Anderson’s book Free! Why $0.00 Is the Future of Business is well worth a look, you can download the Free audiobook here.
Image sourced from: http://www.boozemonkey.com/blog
This morning I published a very quick post that simply asked the question ‘Would Viral Marketing Work Without Free‘. The idea of this post wasn’t to showcase my knowledge of free, it was simply to gain insight into what others thought.
As often happens with these things the response to the post came through a less conventional means (email). Unfortunately, this great piece of feedback from another kiwi blogger was not available to you the public…so in order to free it up and gain a wider perspective on it I thought I’d re-hash two of the questions that were put forward*. I’m sure my answers are far from definitive, so please chime in and give us your thoughts.
Q1: If the idea/product/service wasn’t free it couldn’t be viral (otherwise how does it spread?)
My Answer: Viral marketing was called WOM before the Internet, so viral still happened but perhaps it wasn’t as traceable (or as explosive) as it is today. So I’m not 100% sure that free is necessary for all forms viral marketing. I guess it depend on your definition of ‘viral’….
What do uthink?
Q2: With management’s motivation for free (a post by @Ophil), that’s fine – but how can you justify Free to the shareholders of a public company? (wicked question huh!)
My Answer: For shareholders it would obviously depend on the business model – for Google shareholder’s it would be easy – the more free products we make that enable people to generate content – the more advertising space we have – the more AdWords clicks we get – the more $$$ you get – easy sell!
But for a traditional business selling widgets it might be trickier – however I believe that the rationale would be much the same – give away something (a platform) that results in enhancing the consumers experience in your industry and set up a process to make sure that you are able to collect revenue (directly or indirectly) as a result of this increased user experience/involvement in your product area – it could be a hard sell to shareholders, but definitely not an unreasonable task.
Once again, what do uthink?
*Please note that questions have been paraphrased & answers have been polished.
Image from: http://www.thecommissionplan.com/
The above vid has been around for a while and it’s pretty popular (180,000 views). It preaches a wicked message but I wonder…have they missed a crucial feature of viral marketing.
The reason I wonder this is because free is the first principle of Dr. Ralph F. Wilson’s 6 Principles of Viral Marketing
- Gives away products or services
- Provides for effortless transfer to others
- Scales easily from small to very large
- Exploits common motivations and behaviors
- Utilizes existing communication networks
- Takes advantage of others’ resources
What do uThnk? Is free the vital component in viral marketing? If so was there such a thing as viral marketing before the web brought the free economy to life?
So Ning is about to make users pay for their service. Bummer. Check out Sam’s post (link here) to see why this move is lame.