iThnk.com – Business Insight About: Social Media, Co-creation and Free/Style

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?

Though the payoff from free/style business is obvious for customers (free stuff!), what possible reason would managers have to implement such an approach?

The organisational value in free/style comes about because it addresses the fundamental problem all firms face; how to get customers.

In traditional approaches to business price acts as a barrier to entry, and lots of activity is related to knocking that barrier down.

Marketing does this by trying to convince customers there is no risk in paying the price…

The problem is when there is a price, the customer always has a risk!

Free removes this

What’s the payoff for the manager adopting free?

• Overcoming the natural aversion to change and risk that humans have
• New customers using their offering, experiencing their service and giving their organisation the opportunity to prove the ‘value’ the marketers keep spending money on convincing them is there…
• Opening the channels for dialogue about their experience and opportunities in the future
• Customer information that you would normally have to pay a third party to collect

Why wouldn’t managers want these opportunities?

The only reason could be that what they need us to pay upfront as they can’t deliver on their promise

Of course it is not so simple to make free//style work for everyone, but given the compelling reasons to, you should be trying…

PS Thanks to Bwagy for asking the question. To see how he approached it check his book and “pay what you want” consulting.

Late last year Phil Osborne presented his thoughts and insights into the concept of free at TEDxDunedin, in doing so he also coined the phrase Free/Style…

If you’ve been paying attention to the changes that have been made on iThnk you would have noticed that Free/Style is now a new topic heading. So you can expect both Phil, myself and who ever else chooses to jump into the fray to bring you our regular musings about fee. We’d love you to join the conversation and contribute your insights about how free is/or is not changing the world.

This is a guest post that I wrote for the PocketSmith blog. Pocketsmith is a personal finance and forecasting application that uses a freemium model – check them out.

When talking about free there’s clichés aplenty…“there’s no such thing as a free lunch”, “there’s free as in speech and there is free as in beer” etc. The funny thing about clichés is that there’s often a kernel of truth to them.

There’s No Such Thing As A Free Lunch.

You might be thinking…I’ve snuck into a couple of free lunches in my time and got away with it pretty much scot-free, are you sure there’s no such thing as a free lunch???

Well yes, but I’m not gunna argue with you, you can take it up with Chris Anderson. In his latest book Free! Why $0.00 Is the Future of Business (download the free audiobook here) he acknowledges that even when the consumer is paying $0.00, somebody is still paying for it in some way, shape or form.

Who pays when its “Free Forever”…free forever could be more appropriately re-labelled as “subsidized”. With zero cost to the consumer, the cost is usually passed onto an advertiser or future acquirer. In some cases this can create a conflict of interest and almost always results in an indirect cost to the consumer.

Who pays under a “Freemium Model”…“Freemium” basically describes giving away a free version of a product with the hopes that a number of free users will love it enough to upgrade to the “premium” version.  Simply put, the minority who love/need the service enough to upgrade to the premium version pay for the free users. Countless online businesses use this model simply because the marginal cost for hosting each free users is almost $0.00 – long live the longtail.

Who pays when there is absolute “Freedom To Pay”….also known as the donation model. This is where the generous consumers who actually uses the donate button funds the service for the huge majority who take the free version and run. In the case of free wordpress plugins this model sometimes leads to underpaid developers, poor plugin maintenance which ultimately costs the blogger in both time and energy.

Who pays for “Open Source”…loads of different people, in the case of the Mozilla Foundation, Google forks out for over 85% of their revenue. In the case of Linux there are a number of large organisations (e.g. IBM & Intel)  that dedicate the time of their developers to making and submitting changes – don’t believe me then check this chart. Both Firefox and Linux also also sell T-shirts, mugs and other fan gear which gives the consumer the ability to (financially) support the cause. There is often also an additional cost to the consumer, this is the time cost associated with the additional hours dealing with bugs.

Um duh’…there are pros & cons for each form of  free…when choosing between similar types of software each using a different free model you’re clearly making a trade off between the various pros and the sometimes not so obvious cons of each.

Free Beer vs Feer Speech

Free beer is supposedly the bait that is used to hook a consumer.  Free speech is supposedly free with no strings attached. To some extent the same is true for the online world.

Free software is somewhat like free beer, as indicated above, someone is always paying. However, speech is now freer than ever. We can now publish what ever we want whenever we want. Your newly empowered consumer voice now  gives you (along with everyone else) the ability to  air your concerns, wants, needs, dreams and desires to the world.

Who Wins In The World of  Free?

The real winner in the world of free is the uber-smart consumer who will take advantage of one or multiple forms of “free“. A truly savvy consumer will also maximise their bliss by using the web to supercharge their Free Speech and get more of what they want.

On the flip side of this it’s the companies who attempt some sort of free (as in $0.00) and are open, responsive and even encourage the free speech of thier consumers that will really excel in the world of free – Phil Osborne would call this Free/Style Business (video here).

If you’re interested; this is a great post about 3 variations of free from OnStartUps.com, and this is a great Trendwatching briefing about FreeLove – enjoy