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Giving it away for free isn’t a Business Model

If you give your product or service away to would-be customers, you set a dangerous precedent that you’re willing to give it away forever.  As I’ve said before: if a customer isn’t paying for your product in some way, shape, or form, you’re not running a business. Getting a customer to use your product for free only proves a customer’s willingness to pay nothing.  True value is established when a customer forks over a dollar (or lots of them) for your product.

How could Netscape invent one of the most popular and widely adopted software applications in history and at the same time never make any real money at it? Simple – they established the price at “zero.”   Getting customers to go from “free” to “paid” is extremely difficult to do.  Companies establish the value of their product mostly from the price they set for their product.  Does a Bentley Continental GT really cost $160,000 to build?  No, but if Bentley sold the Continental for $20,000 there’s no way they would be able to change the price to $160,000 and hold the same amount of value in consumers’ eyes. Going from “free” to “paid” works the same way. Giving a product away for free is an easy way to confuse the concept of “people really like it” with “people really like it and they are willing to pay me for it.”  People should pay for products that have value and creating a business that ignores this is digging your own grave.  Give them a taste, maybe, but if they want the whole entrée (and if you want to stay in business) you had better charge full price.

Recommendation:

If you must give some part of your product or service away, give them just enough to get them hooked and charge them for every fix thereafter.Giving too much away for free masks the commercial viability of your business.

(From Go BIG or Go Home – Wil Schroter)

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