What have a Wunderman planner, creative and suit got in common? They've all been intensely following and exploring the debate of free versus paid content. Constantly in flux, intellectually disputed and haunted by the spectre of big business, they're also finding that the current landscape is changing day by day. Part of our series on ‘free’.
Rebecca Hanson, Account Handler, examines our relationship with the concept of free and how it can be used for profit.
Do you remember the book ‘Tom Sawyer’ where trickster Tom is stuck painting a fence while all of his friends are off having fun? Tom manages to convince his friends that painting a fence is a privilege and that only ‘special people’ are trusted to paint the fence. In the end Tom manages to get his friends to pay for the privilege of painting the fence for him!
So, how do brands use the concept of ‘free’ to make a profit? In other words: how do you get something from nothing? Therein lies the paradox of free – there are companies making a lot of money by charging nothing for their product.
There’s no such thing as a free lunch
Free may appear to be a zero cost, but it’s no free lunch. There is always a value exchange.
Let’s say your local café has a special offer on: buy two, get one free. You decide to bring two colleagues along to take advantage of the offer. They like the sandwich shop and go back the next day and then start going regularly. The sandwich shop gets two new customers for the price of the original ‘free’ sandwich. And those colleagues may tell more people about the café; the cycle starts over.
In this case the value exchange is the increase in foot fall, reputation and reach for the sandwich shop against the cost of a free sandwich. The subsequent business from the offer more than makes up for the original cost of the free sandwich, but the sandwich is still free in every sense that matters to the consumer.
Online, the scope of ‘free’ is even bigger. Rather than telling your colleagues about a great offer you may post it on your Facebook wall, email it to friends, or even blog about it as Kay did, and Oprah did and Heather did.
How to make free pay
Gillette: give away to create demand
Want a free razor? Just go online, give Gillette some of your personal details and they’ll send you a free razor. Brilliant. You get the razor and they get to add you to their database. Did I mention that the razor blades are £9.35 for four? Gillette gives you the razor for free because they know it easily generates a market for the blades. Gillette then makes its margin back when consumers buy the expensive blades.
This is called freebie marketing and it’s a successful business model. First used by King Camp Gillette (the founder of Gillette) in the early 1900s, when the U.S. entered World War I, the company provided all American soldiers with a razor, paid for by the government. The troops then had to pay for the blades. Gillette is now the largest producer of razors and was bought by P&G in 2005 for $57 billion.
O2 – iPhone: include the cost of the free extra in the overall price
Have you ever been enticed by a free added extra? Free dessert when you buy a main meal? A free laptop when you sign up for broadband? Mobile phone companies do this all the time.
I recently fell victim to the allure of the iPhone and am now tied into a 24-month contract. The data usage is free, and it’s unlimited, but the thing is it’s not actually free – it’s included in the cost of the contract. O2 know they can make more money on more contracts by offering free data as a incentive to sign up but they must have worked out the figures after all, the ‘unlimited’ data use is capped with a fair usage policy just in case!
A Cautionary Tale
Free is care-free
When you charge for something the customer will automatically ask themselves ‘is it worth it?’ This sense of risk – is this the right decision? – introduces a reason for them to think twice about the purchase.
With ‘free’ there is no risk of making the wrong decision. ‘Free’ offers the opportunity to sample with no emotional barrier of perceived value.
Let’s go back to the sandwich shop. If the cashier offers you a free sample of a brownie and you like it, then you’re likely to buy it. But what if it isn’t just a sample?
Devaluing the product
Let’s say that our sandwich shop offers you a sandwich completely for free. Would you take it, or assume there was something wrong with it? Maybe it’s stale? When the product is something you’re used to paying for and it suddenly becomes free it’s only natural to assume the quality is not as good. Be careful of free; it can devalue your product rather than work in your favour.
Do the sums
Consumers increasingly expect to get content and services online for free. Even as I write this I am not using Microsoft Word, but free Google docs, my web browser is Firefox (which I downloaded for free) and everything from my Twitter feed to my Facebook account is free. Even my wireless connection (thanks to my neighbour) I have not paid for. Moreover, I don’t expect to have to pay for it.
Maybe then that is the defining factor in the era of ‘free’ – consumption habits and user expectations have changed. We now expect free rather than anticipate paying and this is driving forward the free movement.
As a brand the important thing to remember is that ’free’ is not a static concept. It means different things in different media and while the psychology of free can work for you it can just as easily work against you.
Top tips for free
· Give away one thing to make demand for another. E.g. Gillette’s free razors create demand for the blades
· Include the cost of an added extra in the overall cost but advertise it as a free extra. E.g. Amazon ‘free shipping’
· Create a supposed value. E.g. Tom Sawyer getting his friends to pay him to paint his fence
Entice the consumer with free samples then charge for the full product. E.g. online newspapers such as the Wall Street Journal
1 comments:
Well written Rebecca
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