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Marketing of Free

Was a time when marketing was simpler.

All marketing involved a trade. Brands offered a benefit, actual or perceived, for which consumers shelled out money.

If you want fairness..it will cost you 25 (pick your currency).

Want a snack..that will be 23 of some currency and so on.

Consumers knew and expected a value from the brand they were consuming and expected to pay for it.

Sometimes brands thanked their consumers by giving more for the same price.

At the core of it always was a business transaction.

You pay… you get something in return.

Then about 15 years ago came along a company long forgotten, called Hotmail. It offered email, a highly desired service, absolutely free.

Within a short period of time Hotmail had signed up millions of users. Seeing this Microsoft forked out 100s of  USD Mn for the company. Or rather for its user base. Mouth-watering numbers were quoted and all kinds of spin around its value was heard. Of course as we all know that didn’t happen, and in fact that brand itself has vanished.

Hotmail gave its users value for free, and the brand didn’t last.

That was the start of the ‘madness’ where companies insist on giving away their service for free and the business model depended on someone else paying for it. The dot com boom was intense and short lived.

In the meanwhile the old world brands continued to offer their products for a price. And consumers continued to pay for it.

The new world believes that giving it away for free is the way to do business. Facebook, Twitter, Groupon etc are great examples of this world. Clearly they provide value to their users, yet they do not charge for this. They give it away for free.

From a business stand point this just doesn’t seem to make sense to me.

Giving away something for free in the expectation of getting money at a later date through loyalty is a common practise. Credit card companies give away free credit cards and then encourage the sign ons to use the card. FMCG companies give away sachets for the reason that trial will convert. Shucks, in the new world you get apps for free, with the catch that full features or upgrades will cost you money.

Nothing’s for free….for long.

The person deriving value just has to pay for it.

Hence, in the old world,  if you were a marketer your task was rather simple.

Get more customers or get current customers to use more. Use brand extensions, variants, colours, tastes, samples etc to achieve this.

You knew that if you did one of the two above you were going to add to your top line. And if the cost of acquisition was less than the revenue generated you were contributing to the bottom line itself.

However, if what you are ‘selling’ itself is free then what is marketing?

Getting more users or getting current users doesn’t get any revenue. It actually adds to the cost of doing business. eg cost of all the technology to keep servers up, bandwidth etc.

Marketing in this case is, at its most basic form, actually about selling the database to marketers who are willing to pay to reach these people.

I get intrigued with all the Internet people who get all high and mighty about privacy.

This is a business. Someone needs to pay for the value exchanging hands. In the old world it used to be the consumer. That has survived for centuries.

The new model seems to be around the cost being passed on to marketers who pay to reach us. So far no one seems to have figured out how to make this a profitable exercise, save Google.This I think is because of the tight correlation between the value derived and the advertising that pays for it

Learnings from on-line editions of publications like FT, WSJ etc suggest that leaving content for free and expecting marketers to cover the cost just doesn’t make business sense.

At the end of the day it still looks like paying for what you use/get is the way of business.

Sounds silly even as I write that…yet we are surrounded by a growing range of ‘free’ brands.

Marketing of Free sure is the challenge of the next century!!

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