Freebies Pose Challenge For Small Biz
Rhonda Abrams at Gannett News Service:
What happens to businesses when people expect to get things free? Especially small businesses? Surprisingly, an increasing part of our economy is based on the concept that customers get something for nothing.
This trend toward expecting to get stuff free is a major challenge to small companies, especially to all those involved with selling intellectual property — such as consultants, musicians, writers, artists, software developers, or, like me, publishers.
Chris Anderson, editor in chief of Wired magazine and author of The Long Tail, explained the economics of giving stuff away in his keynote address. Anderson’s a proponent of the concept of giving things away free, and his next book, “Free: The Economics of Abundance and the Price of Zero,” is likely to further spread the gospel of that business model.
Moreover, people don’t value what they get free. Even Anderson recognizes this, “When the price of something falls to zero, you get waste.” People value what they pay for. A person who pays $100 for a ticket to an event is likely to show up; when they get it free, they’re just as likely to be a no-show. That’s why I advise entrepreneurs that even when you give your products or services away, especially to a prospect or current customer, you should always indicate the price, then waive it. It shows the true value.
Small companies are not in the same position to give stuff away free — whether it’s a physical product, intellectual property (content, music, art, consulting), or time. Their resources, both of money and time, are far more limited.
But the reality is that the “free” movement will continue, and small companies are going to have to grapple with this challenge. New business models are going to have to emerge for small entrepreneurial companies to survive.
Photo by brokenarts.
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