Jan 28, 2009
The Value Of Free
I recently met a thoroughly decent chap called Chris. He’s English and has worked in Cape Town for the past few years. He has a friend called Matt, who’s American. Matt is no ordinary 25-year old. He is a darling of Silicon Valley. His latest trick was to secure a further $30m of funding for web endeavours he founded. Matt is best known for Wordpress. Turns out that I use his very gear for this salespodder blog.
One of the ways Matt is purported to have made money, is by actively giving away use of his kit for free. The idea being that passionate individuals can share and discuss their hobbies for no cost, whereas when corporations want to pursue commercial ends, for the tweaking involved a charge is levied.
It seems a winner. But in reality, how many of us offer products that have both an individual, non-commercial application as well as a corporate angle, and also lend themselves to be given away in one environment whilst commanding fees in another?
Even though barriers loom large in my mind, I am intrigued by this idea. Especially given our credit crunch created recessionary times. I think that rather than framing it in terms of ‘gratis’, arguments exist within the realms of ‘loss leaders’.
What is it that you can provide free of charge that will likely encourage purchase of something else that you sell?
Of course, any such offering ought to have little margin impact, and preferably have a Marginal Cost of pretty much zero (that means that by providing one extra unit of it, the cost to you is negligible).
Then you need to build a progression path, a way that people utilising and enjoying your toe-in-the-water can readily take on board more of what you provide and pay for it.
For many firms this will be a radical departure, but I look back to the many salesteams I’ve worked within and helped out and can see several opportunities for isolating one part of their offering to draw people in to the rest.
The question is, do we have both the creativity and patience required to see such a policy through?
Wordpress can be downloaded for free and it’s a great blogging platform - maybe the best.
But the Wordpress sector is worth millions upon millions each year, if I were to say $100mn. a year I think I’d be well off and I’d guess it was much more.
Basically Wordpress is open source, much like Joomla - a content management system (which I know a little more about, so I’m using for my example). Joomla as a whole is probably worth as much as Wordpress. More and more people are downloading free stuff for Joomla and instead of paying for the product, they’re paying for the support or membership to a club, that gets free things developed for it.
It’s not much. You can pay $50 a year to be part of a club and get a few free things, but you get the support of the community you are joining, so if you ever need help - it’s almost instantly answered, or within a few hours by people that know what they are doing.
$50 doesn’t sound like much though until you multiply it by the thousands of members that a solid service provider can hope to get in the world of Joomla, if they’ve got something worth giving away, that is.
Good call, Damian, I’ve not had chance to listen yet, but that lauded Radio 4 biz show (In Business with Peter Day) recently did a half-hour on this, including so I understand an interview with Chris ‘Long Tail’ Anderson, the link is http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness_20090108.shtml (perfect provided you’re in the UK I think!)
I very much agree with the movements towards ‘freemium’ (where select uber-advocates pay for more features to fund the free, non-paying rest) and those that provide the basic digital components for free, making money on the real-world add-ons like support, but I’ve not noticed the ‘club’ angle yet in mainstream b2b, although it does sound like a winner as I’ve heard of a couple of (of all people) musicians that are successfully doing something that sounds similar!
As for relevance to solution salespeople, the trend looks like you’ll best give away the digital aspects, and charge (more maybe?) for physical attributes.