19 Oct Freeconomics: What a “Free”marketplace means to marketers
One of the biggest obstacle to marketers in the 21st century? The common penny.
Getting consumers to pay “anything” to sample a product or service — even just a penny — is one of the greatest challenges that marketers face, according Chris Anderson, author of Free: The future of a Radical Price.
Free content, services, and technologies are commonplace expectations in the digital age. As a result, Anderson successfully argues that there are two parallel marketplaces that marketers must navigate in today’s economy: The first is the entirely free marketplace, where consumers get everything for free. The second is the marketplace we’re more familiar with, where products and services cost money.
“From a consumer’s perspective, there is a huge difference between cheap and free,” Anderson writes. “Give a product away and it can go viral. Charge a single cent for it and your in an entirely different business, one clawing and scratching for every customer.”
Giving a product or service away from free is a powerful marketing tool, but it needs to be managed with surgical precision because once something is available to consumers for free, it can become nearly impossible to charge them for it. And, while free products and services can attract a mass audience, they don’t attract loyalty.
People don’t care as much for free things. As Anderson puts it: “Free can encourage gluttonly, hoarding, thoughtless consumption, waste, guilt, and greed.”
In his latest book, Anderson (author of The Long Tail: Why the Future of Business is Selling Less of More) prepares marketers for competition within the ‘free’ marketplace. The book includes countless examples for integrating ‘free’ models into aspects of your business. This include deploying tactics such as direct-cross subsidies, two-sided markets, freemiums, and nonmonetary markets:
- Direct Cross Subsidies. Give away something as added (subsidized) value to customers who purchase something else. Sell a service and provide a free product. Or, sell a product and provide a free service. For example, when people buy an Apple computer, they have free access to an ‘Apple Genius’ from the Apple Store.
- Two-sided Markets. Give something away to create something someone else will buy. Give away content, but sell the audience (advertising revenue). Be the middleman between a buyer and seller and take a cut of each sale. This dynamic is in place at local bars when they offer a ‘ladies night’ (free drinks for female patrons) knowing that it will attract men.
- Freemium. Let some customers subsidize others. This tactics is in play when software companies give away a demo version of software, sell a full version with added features.
- Nonmonetary Markets. Giving things away with no expectation of payment. For example, Twitter and Facebook provide free APIs (application program interfaces) that allows other companies to build off their proprietary platform. In return, the companies generate by increased traffic and the ability to see how the applications created by others are received. When items prove popular, they can integrate the offering themselves with confidence, and no obligation to independent developers.
Anderson’s book is worth a trip to Amazon. com where you can pick it up for $22 — or (in the spirit of a free economy) a trip to the library where you can read it for free.
Speaking of Free…
Enjoy this track from ‘Free For All,’ the second release from Ted Nugent and his first album to go platinum. Rhythm guitarist and lead vocalist Derek St. Holmes left during the recording of the album due to growing conflicts between Nugent and himself, also citing the direction that the album was taking, as a reason. The song refers to a wild night Nugent spent in the Cambodian jungle.
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