 The Idea:
Innovative companies are learning that giving something away free can
be good for both the top and bottom line. Unscrupulous companies are
abusing it. Oligopolies are wringing their hands and calling it theft,
and the end of the world. Is this trend inevitable, and how can we make
it work to everyone's benefit?
The price trend in almost
everything, except for oil and other non-renewables, is downward. In
some cases this is a good thing: Open Source development of software,
and the free exchange of information over the Internet, for example. In
some cases it's not so good: The Wal-Mart Dilemma
for example, which trades off low prices for poor quality, third world
slavery and loss of Western jobs. In some cases whether it's good or
bad depends on where you sit -- File-sharing, for example, which allows
new artists to get low-cost exposure or markets, and which hurts both
the price-gouging recording industry oligopoly and independent artists
who count on modest-price CD and MP3 sales to make a living.
Conventional wisdom is that if you lower the price you have to make up
the loss by either cutting costs (by squeezing suppliers and employees
a la Wal-Mart) or drastically increasing volume, a la Amazon. But what
happens when the price goes to zero -- How do you make money then?
The answer is by being innovative, and recognizing that the
supply/demand curve is inexorable, and, except when distorted by
government subsidy, failure to absorb full external costs, or
oligopolistic price-fixing, the price will find its own level. And
increasingly that level is zero, reflecting both the lower value that
consumers put on most of the mass-produced junk that we're inundated
with, and the lower buying power that consumers have been left with
thanks to corporatist exploitation and cowardly lack of government
regulation.
If you can't beat 'em, join 'em. How can responsible, innovative
companies give stuff away free, and still make a living? Some new ways
are being invented all the time, but here, classified by consumer
receptivity, are some of these techniques:
1. Thumbs Down -- disreputable methods, some bordering on fraud:
- Pyramid schemes:
Sign up five other people to buy X, and you get it free. Just don't
expect those five other people to be your friends ever again.
- Buy one get one free schemes: Consumers aren't stupid. They know this means half price when you buy in bulk, not free.
- Limited-time free trials:
One of the frankensteins of high-tech. This means you have a
now-useless piece of software, non-functional link or 'expired' online
subscription with the vendor's name all over it, so you can curse them
again every time you stumble over it until you get pissed off enough to
delete it once and for all. Once you've given something away it's bad
manners to take it back.
- Free if you're not satisfied: Yeah, right. Just try and get your money back without investing more in time, effort and aggravation than the product cost.
2. So-So -- methods that work sometimes, sometimes not:
- Free samples:
These are better than limited-time free trials because they don't
persist, on your computer or anywhere else. Once they're gone, they're
gone, and you know that going in.
- Free prize inside: So-called
by marketing guru Seth Godin, this is something you give away that's
'hidden' in the product, like the crackerjack prize, or a surprise
feature in hardware or software, or the extra video you get with your
music CD. If it's genuinely valuable and not hyped, it's a good deal.
But if it's not valuable, you're getting what you paid for it. And if
it's hyped, the consumer will start to suspect that it's not free --
its value has been built into the total price.
- Shareware, pay what you want: Free with a guilt trip attached is not free, unless you're shameless.
- Barter: If you're
trading away something that someone else values more highly than you
do, to get something that you value more highly than they do, then this
is a winner. It rarely works that way, however, and when it doesn't,
barter is just two market transactions back-to-back, with the money
reflecting the real (greater than zero) price invisible. All you save
is the sales tax, and maybe the environment if you're buying used
instead of new. Which is OK, too. But not free.
3. Ingenious -- methods that work:
- Information and/or do-it-yourself process free, 'live' service extra:
We need to learn to do more things for ourselves. I applaud companies
that help people do things themselves, and offer to help, at a
reasonable charge, if it turns out they can't do it themselves because
they just don't have the time or the skill. It can be abused of course,
if the information or do-it-yourself instructions have landmines in
them (e.g. vague, erroneous, or impossible to follow instructions). But
it's usually legit.
- Basic product or service free, premium product or service extra:
You get what you need to function effectively, a 'satisfactory customer
experience' free. Add-ons that increase functionality, convenience, or
ease of use, cost. Give away desktop-to-desktop VoIP free and charge
for desktop-to-landline calls, as Skype has done. Or give away the CD
and create a huge appetite for the band's live $60/ticket concerts.
Again, this can be abused if the basic service doesn't meet minimum
functionality standards. But most companies realize the bad PR they
will get if they abuse this isn't worth it.
4. You Tell Me -- new methods not yet proven:
- Money back if you don't use it:
The other day I heard a radio commercial for insurance that gives you
your premium back if you don'f file a claim during the year. If you
don't, and you renew for another year, they keep the premium and apply
it to that second year, so they effectively have one year premium to
invest forever, and they make their profit by that investment. Their
premiums are probably higher than the normal insurance company rates,
but once you sell the car or house you get it back, so who cares? I
suspect that if you have a claim they drop you like a hot potato, and
that, because you forfeit the premium if you do, the number of claims
is probably lower and the likelihood of anyone putting in a small claim
is low. But it still sounds too good to be true. Anyone know about
this? Is there a catch?
What am I missing? What other innovative or devious ways are companies
using to give people something for nothing, and still make a living? Is
this the wave of the future? Think of the essentials of life: food,
clothing, energy and shelter. How could we give people a comfortable
level of all three, for free, in a way that would allow the producers
of these things a reasonable income? And if we did, would people get
lazy and stop working? Would this necessarily be a bad thing? Or would
they be inspired by a personal moral code to invest some time and
energy to give something back, free, in return?
|
MADE IN CANADA
trust your
instincts 
