Can "Free" Work for Your Company?

(Enjoy this video that LinkedIn has let me unlock and provide to you, for free!)

Free is all the rage these days. Investors want entrepreneurs to make a land-grab and gain awareness and eyeballs, as quickly as possible. We've all heard the saying though, there's no such thing as a free lunch and, as my grandma used to say, "Why would they buy the cow "when the milk is free?" So what should you do when it comes to giving it all away? First of all, it's important to understand why so much more value is being given at lower costs than ever before. It's because the cost to deliver is declining. Today, anyone with a mobile device can film, store, and serve coverage of emerging stories, even as the stories are happening and at minimal cost.

We all know that and your customers know that too. And so they expect you to price accordingly. In other words, no one cares that you have expenses. You need to be at least at parity with your market.So anything that's already been declared free, must be free. And if you don't want to make it free, stop creating it. Now, many of you might be thinking that your content is so darn good that additional fees are justified. I can tell you from experience, this is probably not true, unless you provide an experience that is really unique and there really is no substitute.

The point is, most organizations overestimate the uniqueness and the relative quality of their own services. Now, free doesn't have to be a burden of keeping up with the Huffingtons and the YouTubes. It can also be a really effective tool. And the declining costs of technology mean that many free offerings can have minimal, variable costs. Meaning that you don't have to lose any money out of pocket by offering them. Free trials can be really effective as well. This is when you give a prospect a taste of the best you have to offer.

A test-drive of your Lamborghini, a bite of your filet mignon. It works great when your prospect doesn't understand how amazing your offering is and you need to let them experience it for themselves. Another popular way of incorporating free into your model is through Freemium. Freemium is when you offer two kinds of subscription: One that is free forever and one that is premium, or paid. 

Freemium can do three things for your business. 

One, help prospects make your offering a habit, so they will upgrade and pay for more and better.This is what Evernote does. 

Two, serve as a marketing channel, in which the freemium members, by using your offering, organically build awareness of your offering. Sometimes this is referred to as the Viral Effect and the idea what popularized by the email service Hotmail, which featured an auto-signature at the bottom of each email that said, "If you want an email account of your own, "click here." 

Three, create a network effect, which means that each new free member of your community makes the experience more valuable for the people who are paying a premium.

Think LinkedIn or Skype. In each of these instances, the premium offer is actually serving an important marketing function and there are metrics you can use to track its effectiveness. With the first two, you can measure how many freemium subscribers, or people touched by freemium subscribers, upgrade and compare the effectiveness of these campaigns to other acquisition campaigns, like advertising or direct mail. With the network effect, it's a little trickier. You might want to track satisfaction against the size of community, but you can also track behaviour and see how many times paying members are accessing the non-paying member or their content.

Not every business can justify a free offering and it's okay to have a solution that must be paid for.

Sometimes, if you offer too much for free, you actually end up training your prospects that your offering should be free. Don't do that. 

But before you write off free as too expensive or too risky, think about what burdens you have in growing your business. Do your prospects understand what you're offering? Is your membership big enough to have an engaged, active community? Are you struggling to find ways to build awareness at a reasonable acquisition cost? 

If any of these are an issue, free might be the secret weapon your business model needs.

Robbie Kellman Baxter is the founder of Peninsula Strategies LLC, author of The Membership Economy, and and a LinkedIn Learning course author.

Her clients have included large organizations like Netflix, SurveyMonkey, and the National Restaurant Association, as well as smaller venture-backed start-ups. Over the course of her career, Robbie has worked in or consulted with clients in more than 20 industries.

As a public speaker, Robbie has presented to thousands of people in corporations, associations, and universities. She has an AB from Harvard College and an MBA from the Stanford Graduate School of Business. Find Robbie on Twitter, @robbiebax.

People have been reaching out to Robbie after viewing her new Lynda/LinkedIn Learning courses on Customer Success, Business Development, Create a Membership-Based Business and Develop a Service Orientation asking me how she works with companies. Contact her at [email protected] to set up a complimentary call.

#subscription #freemium #membership #linkedinlearning #pricing