How do you make a buck when everyone expects "free"? | P.S. How Jell-O invented branding.

[#1]

The digital economy is different from anything we've ever seen before. In the old world of atoms (physical goods), prices generally rise...build a better, faster car with more goodies and you can charge more. In the digital economy, Moore's law and a bunch of other stuff collides to make the price of digital products and services go to zero...zilcho, free. So how do you make a buck if you're in a digital business? The answer lies in the concept of "fremium." If you don't know what that is, check out this great keynote address from the editor of Wired Magazine: http://www.building43.com/videos/2009/07/28/revenue-bootcamp-chris-anderson/

[#2]

Thanks for posting this... very interesting.

Microsoft took down Q&A by including Access in Office.

Apple got their market by discounting for schools and educational institutions, an area that was largely ignored at the time for the newpersonal computer market.

A more relevant example of this is the concept of free support, especially in IT...support is nearly always paid for. Either by a higher price for the product or by "unbundled support", where users pay for the service they desire rather than everyone having to pay.

Another interesting area are the number of dedicated users who provide free support to other users on sites like this one. From time to time I get accused, by someone I'm trying to assist, of being paid by Sage for daring to insist that a specific issue migh be something to do with their system. some people just don't value what they get for free.

[#3]

Great response!

Free is still something that many people don't understand or even trust, but I think the "natural forces of gravity" as Chris Anderson states in his video will force us all to change and adapt.

[#4]

When you give something for free (lost leader marketing or some "quick" support) do you do this to attract customers or improve customer satisfaction or some other reason? If for a positive purpose, does it work?

Or do you feel that it devalues your product or service and you only do it to match a competitor or because you don't know how to charge for it but somehow feel obligated?

I know this is an area that many of us who deal with SMEs (like most of the ACT! Consultants) struggle with.

For example, with ACT! 3.0 (Symantec) and ACT! 7.0 (Sage) the product was so flawed, many consultants felt obligated in doing free support to help customers who had purchased on their recomendation. Fortunately, that's not an issue now... but with competitive market providing "self-help" resources (even Sage provides some good free video training and this site), business decisions need to be made that either match the free offerings with the hope of gaining clients for more personally customised bespoke services OR do they need to justify the investment OR just hope the userstrust you enough and don't want to do the research?

Russ, this might make a useful idea for you to bootcamp with some ACCs to see what works... then, generalise it for a whitepaper for the SME users. From a business perspective, the ACCs are reasonably typical of a significant share of the ACT! user base.

Regards,

Mike Lazarus

[#5]

Mike,

The big win when employing a "freemium" approach is that if you do it correctly, you are building a new relationship based on value and trust. They will be more likely to patronize you and your business once they get to know you. I definitely think taking a look at "programizing" some sort approach for the ACCs might make sense.

[#6]

Where I am with the freemium concept is to give to receive but ensure that you give the prospect a carrot and they will knowingly allow you to harness the inherent power of your capabilities as a consultant and enable them to acheive what is it they want to do in a more robust way and at less overall cost.

Free Needs Assessment for example, perhaps waiving the inital onsite fee all in the name of building a relationship and not nickel and diming everything.  I think this sends a message that you are not desparate and are alive and well have have something real to offer that others already must know about and they are missing out.

Of couse then they need to pay for the good stuff and perhaps in advance if they want the best deal.  Sometimes I sit back and marvel at prospects concerning themselves of a few hundred dollars per user in terms of looking at their options, when the productivity boost pays for it and then some.

There is alot fo oversell in the market and folks are signing contracts and and buying more features that they need and don't use them.  Rightsizing seems to be the appropriate response and knowing your competition to say it like it is and then let the client decide who they are going to trust.

[#7]

Great post. If you haven't, watch the video I originally referenced. One of the most interesting ideas that I got out of that address was the fact that companies like newspapers would give out their best and most popular content for free (Wall Street Journal model), but then charge for specialty info. I know this was in reference to companies in the information business, but could that also work (on some level) for ACCs as well?

What if you were willing to come out, fix one of their most vexing problems for free, then charge for follow ups? There's a risk you could donate more time and expertise than you care, but what if you could save the day by repairing, for free, someone's broken database. I'd say you'd be the first to get the call next time there's a problem.

In general, I think "freemium" is trickier when your product is a service as opposed to digital information, but I think the concept has promise. What do you think?