September 10, 2012
In the process of writing this blog post, I logged into my Wordpress account ($100/year), downloaded the visual above on iStockPhoto ($3/image), checked the comments flagged as spam by Akismet ($5/month), and made sure that Outbrain was promoting my post on its network ($.15/click). Blogging is supposed to be "free marketing," but that's OK. You see, I am happy to pay for these services, now that I have learned my lesson that "free" is a curse. A few months into launching my new research tool, the Minimum Viable Concept Test, I decided that it would be a good idea to provide some free tests to potential clients who were in a position to become repeat customers. Since our type of research was completely new to them, I figured that a free sample of the entire product would impress them and win ongoing business. After all, every one of my other, paying clients loved the output--so how could a no-risk trial version not close a sale later? Well, every one of these free tests produced useful results that the clients greatly appreciated--but none of them converted into paying clients. This was a mistake that cost me significant time and money out-of-pocket, both of which are exceedingly precious in a startup. This experience--and seeing the struggles of other startups in my portfolio--have convinced me that free is a curse. Despite decades of free sampling at the heart of marketing, and an entire startup economy that seems determined to make "free" work, I beg you to reconsider offering your valuable products, services and time for free--or at least treat this strategy with the same care as nuclear material. Here's why free is a curse:
- Free doesn't weed out the disinterested. There are lots of potential customers for your product or service, but not all of them are ready and willing to pay. Unfortunately, when you offer something for free it's too easy for them to say "yes"--so you end up attracting customers that never had an interest or intention of buying. Forcing a prospect to put some money on the table is the best way to make sure that you have a real, live lead.
- Free warps the value equation. No matter what your pricing sheet says, when the client pays nothing, they can't help but expect to keep paying nothing. They are happy, of course: The service worked out well, in part because it was free. But, when you come back with a purchase order for the next one, the client feels worse. "Value" equals "Benefit" divided by "Cost" and you just slapped a big number on the Cost line. Pulling out the wallet now feels painful.
- Non-cash value exchange is too hard. I've tried to offer some free tests to partners who promise to add commensurate value in non-monetary ways. It could be barter system in which you get their products or services for free, or some promise to feature my business in their marketing efforts. It always sounds good in theory but is very tough to execute. In bartering, each side has to do too much negotiating to determine what is a fair trade. And marketing support from the other side is nearly impossible to work, since the other guy needs to focus on marketing his own business first and foremost.
- Quality of service can suffer. I don't think I've fallen victim to this one, but there is a natural temptation to put less effort into the customer who isn't paying you a dime. When two emails hit your inbox at the same time--one from a paying client and one from a free trial-er--which one do you answer first? The paying client's message, of course. This can add up over time, further weakening your odds of turning the free account into a paid customer. Even worse, the free client is can spread poor word-of-mouth about your business whether he or she has paid or not.