The lesser known Side of FREE
A word of caution:
1. This article is full of cases from Google, Adobe, my personal experiences with a touch of Amazon and all of it makes this a little long. So, find some time, sit back and enjoy your reading.
2. As always, I still hate arriving at conclusions. It’s now up to your point of view on how you want to interpret these events.
It’s free. Is it so?
No matter which part of the world you are living in, FREE has got a distinctive place in our minds that no other scheme can tradeoff for. Am I right?
Well, only partially and I will come to this once again in some time.
For now, let’s stick to the point that no matter how long you discuss, it has been proved that FREE forces you to behave in a strange and predictable way. And more interestingly, It makes you go for the options you would not have chosen otherwise.
Free is something that has got altogether a different emotional connect with our hearts.It strikes a chord that not only makes you excited and thrilled but also pushes you towards something that you would not have agreed for even in your most eccentric dream.
My moment of enlightenment came when I got hold of this amazing book called Predictably Irrational by Dan Ariely. This book has a dedicated chapter on the impact of Free over the minds of the humans. Most of the experiments described in this book were intelligent and proved absolutely correct during my personal research.
By the way, if you are an entrepreneur, do give a try to this book. It is available for less than $5 dollars in India. Click here to buy this book.
Value is important. However, it’s also complicated
An Amazon gift card worth $27 is available for 10$ and another gift card worth $10 is available for FREE. Yes, you read it right. It is indeed available for FREE.
From the above two options, which one would you have chosen?
Keep your suggestions with yourself and stick till the end. FYI: Most of the responded went for the option 2 when this research was conducted by Prof. Dan Ariely( as mentioned in Predictably Irrational). After all, it’s FREE.
“ So, Should we say that FREE and Zero cost are same?”
Consider this: When you decide to pick something not so important for FREE, you since that very moment start incurring the cost of trade-off, the cost of opportunity and the cost of the results. Even though there is no real cost attached to it, there is an amount that you land up paying for this new habit.
To get a deeper understanding of this cost, there are two interesting articles that are mentioned at the end of this write-up that explains the cost of free content over the Internet.
Now I want to elaborate my opening statement with an incident. Currently, I am on my efforts to travel North India and I am already done with Lucknow, Mathura Allahabad, Varanasi, Nainital( the place I belong to) and will be leaving for Jammu today (yee). Now, while I was about to step into Rangnath Ji Temple in Vrindavan ( 10 KM away from Mathura), a guide came towards me and my friend. It was obvious that he was about trying his luck with us.I have visited the place several times and I’m almost aware of most of the facts.
But the case was not same for my friend and he wanted to get the best out of this experience. Initially, I was a bit reluctant but then the guide said something that made me immediately say yes. He offered the tour of the entire temple for just ₹20. Now, this is one of those rare times when we trade off free with some other value, which is often higher. This happens because the rational side of our brain starts computing the cost to value analysis immediately when we start incurring losses. For just ₹20, the tour of the entire temple was an unmissable catch.
But what will happen next is something that our brain fails to consider.
That guide made us pay money for shoe stand (that no one else pays for) and also made us pay ₹20 inside temple. At random places, he literally threatened us for consequences from the all mighty if donations are not made. This made our expenditure a little more than ₹60 ( consequences of getting things for free). If you think that the matter was settled with just paying 300% more than the commitment than be assured, it was just getting started.
As soon as we were done with visiting the campus, he took us to another small temple which was made inside a house. He justified his stand by saying that this temple has been here for years and is in fact, it is older than the original Rangnath Ji temple.
This was the red flag ( a similar incident is again mentioned in the conclusion case of this article) because all I saw there were guides and their customers. Things became more clear to me when I saw one of the groups getting involved in some sort of offerings and donating a decent amount of money to the priest.
On the same lines, we were made to sit down and were asked to make a compulsory donation of ₹500(2500% more than the original commitment).
Now, I am a stubborn person and when I saw my friend actually making that donation, then it was required for me to show that trait. I stopped him and denied any sort of donation.
Newton’s 3rd law proved right and the priest continued denied to lift the curtain and asked us to make way for next set of visitors. The guide who was humble now turned hostile and asked for his ₹20 inside that old temple rather than dropping us from where he picked us.
This is how something(nearly) free might have actually landed something very expensive.
Now, I am a strong believer of the fact that if you are creating something that is worthful, then never be afraid to ask money for it. Just for the sake of developing habits or creating new markets, this approach will not help you in a long run. However, if you still choose to do it, then you must have some very strong reasons, just like adobe had way back in 1995.
In 1995, Adobe decided to launch two products. One for publishers for publishing their writings in digital format and other, the Acrobat Reader, for reading these published document. The pricing strategy for this launch was
For Publishers: $195
For reader: $50
Result: the year 1 revenue was equal to $7 million.
The numbers were unexpectedly low and this is not something that could have made growth predictions for adobe come true.
Next year, they decided to do a tweak and revamped the pricing strategy to the following
For publisher: $195
For Readers: $0
Yes. From early 1996, adobe reader has been made available for absolutely no cost.
Results, a decade later, in 2005, adobe clocked in $650 million from this offering.
This pricing strategy is similar to the one which is followed by Google( Ever wondered why all those amazing services by Google are FREE). Both these juggernauts had a clear understanding of building a network-based business model where one product is sold only on the basis of the viability of its complementing product. In the case of adobe, the publisher will only be valued if the documents created by it are approachable enough.
Just because of the clever pricing strategy by Adobe, PDF has now become the most popular document format.
In the case of Google, the value to the advertisers will only appear(this source contributes to 60% of total revenue inflows of Alphabet Inc.) when Google gets a substantial amount of traffic every day. Once you sign up to google business services you will quickly notice that google charges business for almost everything from an enhanced listing on maps to the ads on Youtube & related networks to the translations of your websites for the visitors. And, all these operational capabilities and ability to ask money comes to Google from the humongous traffic that it witnesses daily.
For Those who lost the battle with free
If WhatsApp would have never been acquired, it might have been on the verge of shutdown
The most fortunate company I have ever, like, ever saw is WhatApp Inc. When WhatsApp came to India, it was taken by storm because of the simplicity it had on offer. And, the best part was that it was free. Things were going absolutely find only until the commitment of 1 year free trial period was not over. For the initial users( who were using WhatsApp in India in 2012), there were many alternatives available which were, at least, remotely solving the same purpose. Even today, the players like Hike and Line have a position in the market which couldn’t have been possible if the users would have never explored the alternatives of Whatsapp.
Whatsapp realized the need for sustainability and at least in India, every customer was upgraded to another year of the trial period for absolutely no price. The same trend continued till the point WhatsApp was acquired by Facebook for a $19 billion deal which is today valued at $21 billion.
Now if you think that WhatsApp is a large enterprise and the same might not be very suitable for the type of work most of us do, there is an amazing article on the Huffington Post, written by Lisa Larter that mentions some work-centric incidents that forced some of Lisa’s business partners to behave in unfortunate ways. Link to the article has been mentioned at the bottom.
Is FREE the ultimate devaluation agent: Yes
Would you ever want to pay for the Google Search engine or a monthly fixed charge for using the latest version of Android? Perhaps no.
Now, you should realize that once asked to pay, most of us ( including me) won’t be able to pay for the service that Google have on offer. However, I am equally sure about the fact that those are capable enough to pay for this priceless service will never pay for them and would easily switch to some other alternate services.
Reason? Let’s come back to my opening example. The one that belonged to Amazon.
Now if you start comparing the value in absolute terms, the profit earned in the deal where you get $27 card for $10, the overall profit earned is $17. However, in the case of the free gift card,
the overall profit earned is just $10. Still, why do people prefer to go for the alternatives that are available for free? Probably because of the real and immediate loss of money that happen due to such purchases. Also, there can be always a risk of not spending the gift card before it’s validity ends. When someone pays a price, they tend to become (pseudo) rational.
This is what happened in the case of Whatsapp. The customer base of WhatsApp decided to become rational( in all wrong ways) and started comparing it with other messengers. While the success of many such alternatives is due to their features, the initial boost that they got in the Indian market was because of the doubtful future that WhatsApp had.
Now, one should not confuse for this as a permanent factor of the judgment of choices. Decisions change and they change drastically. As soon as WhatsApp was acquired by Facebook and its future was sealed for success, the userbase saw a growth that was phenomenal.
Note: Whatsapp till date never allotted a dollar for their marketing budget.
The win-win situation
Almost 10 days back when I was in Varanasi with my family, my mother was very determined to get the best out of Varanasi as this might be once in a lifetime opportunity to visit Lord Shiva's own place. We hired a guide( a little meaner than the one I hired in Mathura). Within 10 minutes of our interaction, it was clear to me that this person was bleeding us white.I mean, who makes you pay 250 rupees for 200 gm sweet and 1 garland.
Firstly I thought that these thoughts are coming to me because of my similar encounters but then some anxious(and similar) looks of my dad gave my thoughts a green signal. In fact, at one point, he made me walk immediately after him so that I stop complaining about the way he was dealing with us. And, at another point, he clearly stated that he will make us visit a particular place only if we commit a basic amount of donation which will be different from his own fees.( he initially said that it can be as per our consent but then denied to take anything less than $7 or 500 rupees).
What surprised me during this entire 2-hour visit with that fellow was that my mother was satisfied with every single penny we paid to him. Now, with absolutely no blasphemy intended, for someone like me, this was a Loot. But, for someone like my mother, who was also the prospective customer of that guide, it was the best treat of her life.
So, how come merely a change in perspective can transform the way a case is interpreted. This is how and where I would like to conclude my write-up. One should always remember as an entrepreneur that no matter what people perceive about the product you are dealing with, if it fits exactly in the gap your customers face, you are good to go. It really doesn’t matter what others think about you or the product.
As far as concerned to this case, I won’t judge the ethics of this guide as they vary drastically from person to person, and that too in subjective fashion. All I see at the end of the day is the satisfaction of my mother and the smile she had after this visit and purchasing 6 Banarasi Sarees.
Please feel free to drop your suggestions at firstname.lastname@example.org
Link to the article describing free content from the internet:
Link to the article from Huffington post: