This is a concept that would make most CEO and managers gag. I pitched this to friends and executives within companies to gauge the response and it wasn’t good. Companies have a hard time giving things away. But consumers love the word free. Free has the highest sales conversion. How can businesses survive by giving things away? How can a company overtake a market by charging nothing when their competitors charge lump sum or subscriptions?
Free The Future of a Radical Price discusses how businesses are capitalizing on Free.
Personally, I first noticed free overtaking an economy in online gaming. There were waves of Massively Multiplayer Online games coming out that were free play at a time when the industry standard was $15 month. I couldn’t figure it out at first until I played them and realized that Free to play meant Pay to win. This was a form of the game that some more “hardcore” gamers take offense to. However other gamers, myself included, liked the idea of a free game. Instead of paying for the software, it was free. There were, of course, thousands of people who flocked to play these games. Most of whom would never have played if the game had not been free.
So how did it work? How does free work?
Free works when the cost of what is free is so tiny that it is easily made up for by paying customers. Imagine you make a software that cost you $1,000,000 to have created and polished for release. Now imagine giving that away. You have 50,000 customers who use the free version. Now imagine that your free version has ads so you collect on the ad revenue. Then you charge a monthly fee of $50 per customer to use our fancy software if they want more features and no ads. Hurray! You’ve attracted customers you wouldn’t have had and the customers you do have who are paying for it are the ones that would have paid for it anyways. Because of your free customers, you are gaining more market share because of easy adoption and zero to no risk of loss to your prospects.
Think of Google. Look at everything Google gives you for free. Why? Because it’s really cheap for Google to give it to you. This had built Google an amazing brand loyalty which makes it easy for Google to release products and immediately have a healthy supply of trusting early adopters.