Monday, November 10, 2008

Better than free

I've covered the subject of the gift economy previously in my posting Open Source Your Idea. But thought it needed further coverage. This happens when the economies of scale work on a global level (thanks to the Internet) and the cost of distribution becomes almost zero (but never really really reaches it), it becomes a business advantage to give at least part of your products away (and is still recommended as a strategy by some eminent VC's).
For example, just take a look at how many 'lite', 'freemium' or 'trial' versions of software packages there are out there (I'm currently a sucker for the demo / trial versions of applications on my iPhone).

So, you've recouped the cost of development, shown it costs you virtually nothing to produce a copy (e.g. software, an idea, a process, etc.) and then your strongest competitor comes along with something...... and charges for it. What makes it worse is that customers pay for it, a lot of them.

So how does that work?

Well according to Kevin Kelly, a great modern thinker, Editor-At-Large for Wired magazine and Author of the 1997 book New Rules for the New Economy (which still holds true 11 years on), there are 8 reasons for paying for something rather than settling for a free version:
  1. Immediacy
  2. Personalisation
  3. Interpretation
  4. Authenticity
  5. Accessibility
  6. Embodiment
  7. Patronage
  8. Findability

Basically, there are several reasons why paid-for stuff is better than free.

It therefore strikes me, in these modern and leaner times, that companies need to reconsider if the really need to give everything away and that this may be the difference between profit & loss (and therefore economic survival).

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