July 9, 2002 Volume 2 Issue 5
How Much is "Free" Costing?
There's been a wealth of material written about the Web.
Some has been hype. Some pure public relations, with little to no real value. Some pure nonsense. And some to get a response ... more or less an open focus group, to see what the marketplace will say and do. We're in that phase now with the "No More Free Lunch" approach to marketing.
Through the spring and now into summer there has been considerable discussion about the cost of providing "free" information via the web. And what some companies are doing about it. Bottom line there is a change afoot. Much of what was once "free" in the world's largest library now has a fee attached to it. And many more sites will charge - beginning soon.
I agree with this approach. I think there should be a charge for good, useable material. Let's turn it around, and ask why should a newspaper or magazine on the web be free ... when you shell out good money to buy a copy on the newsstand? Ditto research - you pay a sum to get a document ... why should there no charge just because it is more convenient to you online? "Yes", I think there should be a charge.
You may say I can read newspapers, magazines and more "free" in my local library. Yet, that's like saying education is "free". It is only free because you pay taxes to support the service. So there is a charge - it's in your tax bill.
Still, why pay for web based services? Because there is "No Free Lunch". Just because material is posted on the web does not automatically make it free. I've never understood that philosophy. Which, by the way, will not fly as a long term business or marketing strategy. And, as a direction itself, is not one that leads to profits.
Sure, I understand "show & tell marketing" is a strong offer. Has been, is and shall always be when the word "free"is in the title. You may recall a few E-zine issues back I talked about launching an Automatic Teller Machine network. It was the mid '70's ... and "yes", we actually paid people to try this funny new box that spit out money. That approach worked to build a market. Which today is "standard", and expected. When was the last time you went into your bank - when you had a choice of an ATM?
I'm penning this article on a Sunday. Today I paid a $2. fee to get into my ATM account. Why? Because it was 40+ miles to my bank, and it was closed anyway ... it's Sunday. Plus, another bank was closer. So, I chose to pay a fee rather than drive the distance. It's called use of time. Convenience. Customer service. Do I like paying? Of course not. Do I understand - absolutely!
Initially, to pull an audience in, giving away the store over the World Wide Web was a good move. Yet today, with over half the working population on computers, and something around 60% active both at home and in the office, marketing, advertising, merchandising and sales promotion can begin making offers that require a commitment from the customer. And in so doing, collect a little cash, too.
We in direct marketing certainly understand a smaller targeted market, vs mass. "Why talk to everyone when you only want to talk to someone" is a favorite quote from friend Drayton Bird of the United Kingdom. As usual, Drayton is right.
How does this philosophy apply to fees and the web? Well, if you are truly interested in a topic, a subject, a position, you're much more likely to be willing to pay to learn more. What many firms are doing is offering a selection of their wares "free". The base content is available to you. When you need more, or want it deep, the real stuff, the total picture, the complete story - then there is a charge.
One of my favorite E-zine messages is from Today's Useless Facts. A tongue in cheek list, including dialogue from readers about various "facts". The base list comes every couple of days - and is free. When you decide you'd like to subscribe for the premium version it's $4.95 for 3 months service. The web site (Premium Version Of Useless Facts Daily - http://www.uselessfacts.net/premium/) allows you to enjoy more for a very small charge.
My favorite E-card place is Blue Mountain - now part of the American Greeting family (http://www.bluemountain.com/). Originally Blue Mountain was a free site. Within the last year they went to $11.95 a year for their full collection of card offerings. With a smaller selection of basic cards being available at no charge.
"Yes", there was an uproar. They lost 30% of their audience almost immediately. And in return signed on 500,000 subscribers within 3 months (including me the first day I knew about it). It looks like there will be 3 million paid by the end of 2002. My math's not very good - yet, that appears to be a good hunk of change.
The Wall Street Journal did an in-depth article on pay vs free. And reminded me of the cable television business. I recall talking to one of the key players from CBS in the late '60's, who was trying to sell a paid television service. It went no where. The market did not understand the value of paying for something that for nearly two decades they had received for the price of a TV set and a tad of electricity. Basically, free.
Well, where is cable today? Where has it been since sometime in the 1980's? Cable and satellite and other services are in our homes, the hotel room, sports bar and restaurant, the casino - darn near everywhere. There is a rare middle-income and up household without some sort of television service for which they pay a monthly fee.
Bingo. The World Wide Web is headed that way, too.
Another example outside "E"; OnStar is the subscriber service offered through General Motors on selected models of their automobiles. OnStar is a satellite / mapping /emergency ++ service which helps drivers be safe, get to where they're going, and more.
OnStar users get their first year free. The package comes with the GM car they buy. Beginning with year two they have a selection of 3 different packages that range in price from $17. to $70. a month. As an example, the premium package includes prepaid cellular minutes .
So, as cable television played with the marketplace until they were ready to buy, OnStar is doing the same. In fact, they are following the WWW model; giving it away free to build a loyal customer base. And then charge a reasonable fee. In the last 3 years the OnStar paid base has grown from 200,000 to 2 million.
You know I ride a real bike - I ride a Harley-Davidson. The Harley Owners Group is a membership organization. You may ride a Harley and not be a member of HOG. Yet, to encourage membership, your first year is free when you buy a new bike from any Harley dealer - anywhere in the world. After that there's a yearly fee.
Well, HOG is now the largest motorcycle membership organization on earth. Something close to 600,000 members. The same philosophy - give it away to show benefits and value. Charge to keep the true-blue members.
So, the World Wide Web is going to cost you something. Big deal! It's worth it.
by ROCKINGHAM*JUTKINS*marketing, all rights reserved.