One more thought on Free

The Anderson/Gladwell debate on Free rages on. Seth adds his thoughts (and a Squidoo lens) while Mark Cuban weighs in and there are a tonne of others, including my friend Mitch Joel who has an excellent recap, adding their thoughts to this fascinating debate.

I was chatting with my father-in-law this morning and we both came to the same conclusion. In our experience, people place value on things based on how much they paid for them.

  • If you pay a high price for something, you place a higher value on it.
  • If you get something for free, you place less value on it.

Ergo, the more you charge, the more value the buyer places on it. Want to add more value (in the eyes of the purchaser) to your product? Charge more. Not less.

Take Seth Godin. We get the same knowledge from his blog as his books, which as he acknowledges are *just* curated versions of his blog posts. But what do you place more value on? The $26.99 book or the free blog post that pops up in your RSS reader? I know what I value more.

Free may be the future but if you can’t charge nothing, charge a lot and add value.

This debate will go on for years. There are so many ironies and paradoxes in play that it will take a long long time to come out in the wash. I think that this shows we are diverging away from middle. Your products will either be free (and supported by some complementary business model) or they will be very expensive. This recession is showing that there is a race to the bottom in some industries, while others are doing very well by charging a premium. It is the middle, the mediocre, that is suffering, not the edges.

As an Internet user, I see free all around me while as a consultant, I want to provide fair value to our clients – so it feels as if I am playing both sides.

One Response to One more thought on Free

  1. Candace says:

    Ed, great post. Each time I go to one of the owning partners of my firm with a new social media service, they say “How is it free? How will they make money?” My inclination; to respond with “Who cares?” But I understand their concerns.

    I look at it this way: free content and services should always aid to your company’s credibility or to further use of your company’s paid products and services.

    Take wordpress.com for example: they offer free blog hosting, but they are run by Automattic. Automattic currently makes money from paid blog a la carte upgrades, blog services, Akismet anti-spam technology, and hosting partnerships. So, wordpress.com users are likely to purchase Automattic’s products for blog enhancements. At the same time, those who don’t purchase anything from Automattic are still drawing potential customers to wordpress.com on a daily basis.

    Depending on needs, you may even choose to serve a client with work created by using free services. However, you are selling your skill and knowledge, not the free platforms from which you may have developed those skills.

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