I got involved in a business model discussion the other day.


(Photo credit: Grant MacDonald)

Someone who has a paid product is contemplating moving to a free model of some sort. The product is fairly unique and I would say has enough demonstrable value that giving it away would cause consumers to question that value.  The main thinking is that in the digital (and many other spaces) people have come to assume that everything is free.  Hello?

First off, nothing is free.  While you as a consumer might not have to lay out any money for the product or service being offered, you are probably giving back something of value.  Your attention (to ads), or your data (to damn near everyone), each of which has quite a bit of value in the aggregate.  Maybe the basic product comes with no strings attached but the really cool stuff requires a payment (freemium).   But that’s not really what was driving my thinking.

People don’t always choose free.  That said people always choose free if everything else is equal.  We call those things commodities, and not all commodities are fruits or natural resources.  Sports scores are commodities, for example.  Why would you pay for them when there are so many free sources (except nothing is free!).

People DO choose to pay for stuff they can get for free.  Bottled water.  Over the air TV.  The real question is this:

How do I differentiate my product so as to add value in the consumer’s mind for which I can charge?

We sometimes lose sight of the fact that price and value, while related, aren’t the same.  For commodities, free (or no price) can be a distinguishing feature.  Where does one go, however, once someone else jumps to free too?  Creating unique products that are clearly better sets up a lot of pricing and business model options.  Being a “me-too” doesn’t.  Make sense?

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