June 8, 2010

Free: The Future of a Radical Price - Freebies Are as Good for Business as for the Consumer According to Chris Anderson

Free is the best price, right? At least when you're buying. If you're running a business, then giving away products or services for free spells doom, right? Not necessarily. 

Why Giving Away Stuff is Good for Business

In Free: The Future of a Radical Price, author Chris Anderson posits the argument that in today's marketplace, the savvy thing to do is figure out how to combine free things -- sometimes known in other circles as GIFTS -- with products or services that are being sold.

And Chris Anderson doesn't just pontificate about this: instead, he provides lots of examples on how this is working. And by working, I mean helping businesses grow and expand in the current tight economic times. 

(Yes, this does explain why I got that free $5 gift card from Walmart a couple of months back.)

Free: The Future of a Radical Price includes real life stories of innovative marketing techniques like:
  1. cross-subsidies, where a cable company gives away a DVR to those who buy its cable service; and  
  2. freemiums, where a company offers a basic service for free and then sells its better (or premium) products at a fee. Think QuickBook's SimpleStart, its free version of its bookkeeping software with assorted premium versions. QuickBooks is my example, there are so many freemiums out there I'm sure you can think - or use - some of them right now.
 The Central Question: Lots of people are making money charging nothing.  How can this be?

Free: The Future of a Radical Price provides a history of pricing in America and elsewhere, as well as the psychological background on how prices impact our thinking.  Pricing impacts a consumer in many ways.

For example, in today's market, there are many under the age of 30 with money to spend that aren't going to pay for a product -- particularly information -- when they know that, given enough time and with some effort, they can find it free on the web.   For many other buyers, the idea that a product or service is being offered at $0.00 automatically gives that product or service certain characteristics that it would not have if it were priced at anything other than zero.

What Does This Mean for You and Me?

With rapidly expanding technology and almost unlimited access to the Internet (in more and more instances, access for the web is free), the idea of offering freebies in order to build a customer base is proving to be a valid and vital component to businesses in almost every industry out there. 

Obviously, getting a freebie from a business that's trying to sell you something is a good thing to a provider.  I was happy to get my Gift Card from WalMart.  It pleased me.  It made me feel appreciated in some way.  I saw it as a gift.  A little treat.  I liked WalMart a little better because of it. 

Free, a Price of Zero, seems to be a no-brainer for the consumer.  However, the key to Chris Anderson's work is pointing out how this is also a good thing for the provider. 

Have I shopped more at WalMart as a result of the gift card?  Maybe so.  However, I have not jumped the bar at QuickBooks to buy an upgrade of their bookkeeping software after trying out their free edition of SimpleStart.

Which may give credence to the critics of Chris Anderson's freebie idea, including Malcolm Gladwell (read Gladwell's review of the book in the New Yorker - for free) and James Ledbetter (read Ledbetter's take on things at the Slate blog "The Big Money" - also for free). 

Free Audio Version of Free: The Future of a Radical Price

Yes: the unabridged audio version of Free: The Future of a Radical Price is FREE.   For awhile, it was being offered for free on Kindle, but that window of opportunity has closed. 

Apparently, Chris Anderson practices what he preaches.
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