An Entrepreneur’s Guide to How Much to Give Away Online
As online competition exploded, retailers and service providers came up with a vast array of gimmicks and techniques to try and get around this problem. One of the most successful models is simply to give away your offering and rely on advertising revenue alone. This is a good model provided you can get enough eyeballs onto the screen.
Not everyone is so keen to take this route. What happens if you don’t have the budget to advertise and bring in huge numbers? What happens if your product appeals to a niche market that is not large enough to support your firm with ads alone? Relying on ad revenue alone is not always the best model. So what else is there?
Unfortunately, another major technique employed by far too many organizations relies of obfuscation or lack of knowledge on the part of clients. Given that most online services or products require some degree of understanding or ability, there is a market to exploit or enhance that niche. We can test the accuracy of this hypothesis right now. Are you ever sceptical of new online products and services? Of course you are. Everyone is, because there is a low degree of trust (rightfully so) in unknown providers.
In order to bridge the gap, companies realized that, just like in the real world of business, trust had to be earned before revenue followed. But how does one earn the trust of a complete stranger yet still expect them to pay for a product or service. The answer; make it easy for them to use some of the service or product for free and decide whether they are prepared to pay for the complete or enhanced version.
Great! Now the trust issue has been solved because anyone can come to your website, start using the product/service and decide for themselves on the quality and whether or not to pay for anything further. But here’s the million dollar question, where do you draw the line? My suggestion is this:
Freely give potential customers precisely enough product or service to sufficiently invest themselves in it.
In other words, you want to achieve one of two things:
allow them to use the product/service to the point where they become reliant on it
get them to the stage where it would be prohibitive to leave for a competitor because of the time and effort they have already invested
It sounds a bit cut-throat, right? But remember, they have been freeloading up until now and any good product or service should rightfully be paid for. Don’t be afraid to give away a goodly amount of your product or service if it is going to achieve one of the above goals – even if it is the entire product. That’s right! Give the whole thing away, if you know you can generate revenue from support and auxiliary services.