Wednesday, December 16, 2009

The Age of Free

“Don’t presume your product is still valuable”

Rupert Murdoch is throwing a tanty because media is changing. He doesn’t like it because he can’t control how communication (through Social media) will work from now on. Comparing how the printed media incorporate advertisement to the new business model of selling Free makes sense to me. The focus has shifted a while ago from an advertising medium to no advertising which now is changing to freemium centered models.

“The key is to create the right mix of features to segment out the people who are willing to pay, but without alienating the users who make up your free audience. Do it right, and your conversion rates might be as high as 20%. Do it wrong, and your LTV gets very close to zero.” - Andrew Chen

The “Free” has taken over. The selling occurs through (free) conversation/download and the services and products are being paid for as a result (by select members). It’s mostly about what problem is being solved and what feeling of satisfaction the client has regarding the product that determines whether they’d be willing to pay. The key word here is value and how it’s exchanged. A relationship needs to be established first.

What is Freemium?

“Freemium businesses are companies that generate revenue by offering a free product with an upsell or premium version. Their economics blends elements of the free, advertising-supported, “eyeballs” business with more traditional e-commerce and subscription businesses.” - Eric Ries

Initially it was extensively used exclusively by the Information technology and Internet companies. But with the costs of digital duplications coming down drastically more businesses from diverse areas are moving into this area. The freemium concept due to its inherent nature calls for a high quality product that can be duplicated digitally. This is essential in order to use it in the freemium model - The Freemium Blog: Taylor Davidson

So in this time of Free how do you determine what YOU will give away for Free, if at all?

Good question as all businesses owners now think about this. And: should you really?

Time is the new value. Most of us have enough income to live on; we need services and goods to make our lives easier and to use these items to help us relax. Also: we require programs and products to keep up with the latest technology. How slow will your computer get if you don’t upgrade and look after it?

So how to decide then what fits our needs best? In the changing time of recession many try to reduce cost and find things for free. Once we trust the person selling us something for free, we usually decide to continue using more of their services or we decide to buy their product. This is the method transferred from the digital to the real life sphere where we have a free consultation and then decide to hire the business’ services.

The other aspect that’s interesting is wanting to learn to do things yourself: the how-to-websites continue to glow hot. People want to learn; easy, fast and NOW.

“I will (mostly) give anything Free a go and when Free exceeds my expectations, then you have my credit card; hook, line and sinker.” - Sy Yin Khoo – web & print designer as mentioned in Idealog

The Freemium strategy

The strategy uses the ‘free’ to showcase your actual value. I see it as a shopping window where you see the baker’s scrumptious muffins and breads. You can smell it, get an idea of the taste and you will decide in that moment whether you will go in and come out the shop with breakfast, lunch or afternoon tea or maybe the whole lot.

According to Eric Ries there are 3 models:

  • Free serves paid. Trading 2 currencies + user-generated content sites
  • Free trial. The original freemium model
  • Free as inventory. Pay only when you want access to a person or item.

Bottom line: the decision will have to be made which customers you will have to turn away by default and which ones you will keep. Another word that comes to mind is Niche: determine who your target customer is as you cannot appeal to everyone. Decide what type of consumer you will offer your service to and how you will approach them.

So what’s the story? Provide something they can’t get elsewhere.

A. The conversation is the process.

I see examples of various businesses that – either deliberate or not – use the Free consultation services to build a relationship with the client through conversation. What does this social dance do?

A conversation establishes:

  1. Listening ear: the wants and needs of the client
  2. Education: teaching about the product, client learns
  3. Likeability: establishing emotional connection
  4. Authority: “they know” creates trust, client feels secure
  5. Problems will be solved = satisfaction and peace of mind
  6. Repeat business

“Today the creative person first step is not to find funding and professional help, but to find a customer and make an impression.- Allison O’Neill in Idealog

B. Your unique insight in how to help clients brings you business.

“Your business asset is your insights, not people or good customer service.” - Matt Ayres

You will know when customers tell you how special it is that you help them in your unique way because:

You understand and listen to them
You give them what they want and make sure it’s a winwin deal.
You are actually looking after them
You have a superior product
Your procedure just makes things easy: customer loyalty

C. Adapt to the market

Understanding your target audience, how they think, what their needs are and what you and your service/product can mean to them is essential. It’s your Business guide for Dummies. Think about your mission and what you’re offering. As times change, will you? Your customers are likely to change with the times as well. Be aware: look around, read, talk to people, and keep your ear to the ground. Don’t think it’s just a fad and everything will return like before because it won’t. The main thing is to look clearly at what’s working for you and HOW it’s working for you. That’s the key.

You will have to decide who your target customer is: define niche
Is the freemium business model right for you?
If so: what do you decide to give away for free?
HOW will you integrate the latest technology and developments?

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