FREE Is The New Business Model
Back in 1999, before Google became the universal search tool, people struggled to find their way around the Internet. There were a dozen major search engines (remember Excite, Altavista, Hotbot, and Lycos?), another dozen minor ones, and more cropping up each month. But none of them were very good.
I got frustrated trying to work with the available search tools. Figuring others were having the same difficulty, I built a website called SearchIQ.com. I listed all the available search engines and reviewed how well they worked —or, in most cases, didn’t work at all.
Within a few months, my site had a following and soon was receiving over 300,000 visits a month, which was a big number back then. By the end of the year, SearchIQ.com was listed as one of the top 50 sites on the Internet.
I hadn’t built the site to make money; it was a project on the side. All I knew was that by investing only a few hours a week giving helpful information away for free, I was getting tons of traffic to my site. People wanted and needed to read my search engine reviews.
That’s when I discovered the huge value of Free as a business model. Late in 1999, an editor at ZDNet contacted me and made a generous offer to buy SearchIQ.com. ZDNet’s business model is simple; they publish reviews of products and information and because they pull in massive amounts of traffic, they can make money on advertising revenue.
My timing couldn’t have been better. I sold the site to ZDNet just before the Internet bubble popped. What happened to SearchIQ after I sold it? Google quickly took over as the dominant search engine, making my search engine review site obsolete. (I’d like to think Google’s success is due to the glowing review I once gave them…)
In fact, Google itself started off without any ads, giving away its service for free. And it continues to give away its search services — along with a whole host of tools, email service (the widely popular Gmail), calendars, document storage, etc for FREE. In doing so, they make billions of dollars each year in advertising revenue.
Free is everywhere, not just online. Cell phone providers give away cell phones, magazines publishers give away subscriptions, cable TV companies give away DVRs – to name a few. The idea that you can make huge profits by giving away something for free or for almost free is no longer a radical concept.,,
It’s the new model of doing business.
“But Charlie…How Can I Make Money Giving Stuff Away Free?”
Most business owners try to extract as much money as they can from the customer upfront. They EXPECT the prospect to read their ad, respond to the ad, call them and buy all in ONE step. A few will. But there are a HUGE number of good prospects who will walk away, unready or unwilling to buy now.
This “buy now or nothing” mentality doesn’t work anymore. A whole generation has been raised on getting music for free and getting information online for free. And in a down economy, it’s what more and more what people want.
So if you want to succeed in business, get with it, and start leveraging the power of the FREE business model. Here’s how it works: when you offer something for free, you attract many more people faster who are interested in your product or service, often at a far lower cost than if you spent money on traditional advertising.
That’s what bands including Radiohead do on MySpace. They give away songs to attract a loyal following, people who then go on to buy cds and attend their concerts.
It’s not just high tech companies that use free. When I wanted to teach my son to ski, the local ski area in Vermont, Mad River Glen, provided my, then under 5 year old son, with ski boots, skis, ski poles and his lift ticket, all for free. By the time he turned 6, like me, he loved skiing and I was paying for all of the above.
Almost free works too!
If you own a computer there is a good chance at one time or another you’ve gotten a FREE or almost free printer thrown as part of your purchase. At our house we have half a dozen Lexmark and Hewlett Packard printers that cost almost nothing or that came free with the purchase of a computer.
How can these printer manufactures give their printers away at a loss or for free? They know that to keep their printers running, you’ll need to buy their printer cartridges, printer cartridges that each cost more than the printer itself. And that’s where they make their money, not in printer sales but in ink cartridge sales.
Ryanair uses the same almost free strategy, selling tickets from London to Barcelona for as low as $20. Less than the cost of two movie tickets here in Connecticut. Then they make their profits on ancillary fees, a share of related reservations, advertising and fees on credit card sales.
But be warned – just giving a product or service away for free or at cost doesn’t guarantee you’ll ever make a penny. For instance, Twitter’s free service has a huge following, but they’re still trying to figure out how to pay their bandwidth bills.
To monetize those freebies, you must entice the user to pay for something else. The key lies in determining how to convert the attention you get from giving away something for free into cash in your bank account.
Case Studies:
How To Use FREE To Build Any Business
Online Business Example:
Traffic Geyser is a software product that distributes videos to various video and social media sites on the web. Note that instead of “pitching” right off the bat on their home page, they do something smart – they give away useful content for free.
Traffic Geyser realizes the average visitor to their site may not be ready to invest in their software immediately, so instead of “going for the sale”, they offer useful information to capture email addresses and follow-up. Notice the free videos they offer talk about issues related to video marketing; what types of cameras are best, Mac or PC, etc. Although these topics aren’t directly related to their software, they will likely be of high interest to their target market.
Offline Business Example:
If you and your family happen to move into the 51101 zip code of Sioux City, Iowa, don’t be surprised if shortly after you arrive you receive an offer in the mail for a free oil change from the local Speedy Lube.
Why?
Because Owner Chris Peterson has discovered a very powerful free marketing technique “I have seen an 85% return rate on the customers that came in for the free oil change offer. Many needed other services besides the free oil change coupon, and we have gained some very loyal customers.”
To do his mailings, Chris uses a company called Moving Targets that specializes in ‘New Mover’ mailings.
Action Steps: What Can You Give Away To Bring In More Leads?
The goal of your business should be to turn a profit. But in the end, HOW you turn that profit (as long as it’s legal and ethical) shouldn’t matter. If you’re clinging to the idea that “I charge $XX for my products & services, period. I’m not giving anything away free” … you’re severely limiting yourself.
Using free as a marketing model is a tried-and-true technique being used by some of the biggest, most successful companies in the world. You too can use it today to attract more people faster who are interested in your product or service.
1. How can you use this business model to grow your profits?
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2. What can you give away for free to attract prospects?
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3. Obviously the goal isn’t just to give things away for free. What’s your free to paid services upsell sequence?
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4. When will you start using this idea?
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