In Chris Anderson’s new book, Free: The Future of a Radical Price (FTC Guide Disclaimer: Amazon Affiliate Link) the author discusses the role of free content in business. I think that Chris Anderson makes some valid points, but many of the people that are creating free content are ruining their chances of monetizing their work when they try to turn their free content into something that creates revenue.
The Google Android Application Example
I love my Google Android phone. It is fast, lets me check e-mail on the go, and has a growing market of applications that I can download and use on my phone. I see a lot of potential for this device in the future, but it will have to overcome one major hurdle that all user developed application model platforms have to overcome . . . moving from free to paid applications.
The Problem with Many Free Applications
Here is the lifecycle for many applications on the Google Marketplace:
- A developer has an idea for a great application. The developer creates the application, tests it, and then posts it on the market for others to use for free.
- The application catches on and starts to get downloaded by thousands of users. A small number of those users provide feedback to the developer so that the application can be improved.
- The developer updates the application, posts the updates, and finds that even more people are using the application.
- The developer then has a dilemma. He or she has spent many hours creating this killer application, thousands are using it, but the developer has not gotten paid a dime for the application. They then have a brilliant idea.
- After spending a few days adding a feature or two, the developer re-releases the application as a paid application. The old application is also updated to tell the users that it will no longer be updated and if they want updates, then they have to buy the paid version. Sometimes the developer will even make the free version ad supported.
- After a few months on the market, the developer realizes that a very small percentage of people are buying the updated version of the application compared to the numbers downloading the un-updated, old, but free version.
When Free Doesn’t Create Revenue
In the Google Application example, the developer is not converting many of the free users to the paid application because as long as the free version works, then the users have no financial motivation to move to the paid application. Even if the developer cripples the free version, the marketplace will create another free application that can do the same tasks but still be free. In this case, free is not going to put food on the developer’s table.
How Can Free Create Revenue
A free product can help create revenue when it is used as a corresponding component of a paid product or service. It can also be used to demonstrate your expert knowledge of the topic or ability to provide a great product or service. When you are adding non-essential components to a product or service to make it something you can charge money for, you will not convert as many buyers as a new corresponding product would.
How to Do it: Beginning with Your End Goal in Mind
In application development and your business, you have to begin with your end goal in mind and develop your product and services around that end goal. If you want to create the next killer application, then create a mini-application that demonstrates the final end goal of the application without giving away the entire application.
If you wanted to create an application that interfaces with a Customer Relationship Management system, then you could create an application that allows accessing just the contacts of the system for free and charge for the application that allows for managing contacts, creating leads, and assigning leads to team members. The free application demonstrates the greatness of your idea while the full paid application gives the killer functionally of the full application.
How You Can Make This Happen in Your Business
Other businesses can do this by creating a report, blog, or application that solves a small customer problem while allowing them to connect with you for solution to larger and more complex problems. Maybe you are a life coach, so you could create a free report that gives someone the ability to organize thirty minutes a day for exercise. This can then be part of a larger program that helps people with both physical and life goals were exercise is a component.
The key is that is that the free product is a small complement to the larger program. The free establishes you as a creditable source, makes you the expert, and demonstrates your wiliness to part with some knowledge now for the potential of stronger customer connections in the future. Don’t give the killer feature away, but give your customer proof that you have a killer feature by giving them some value out of your free content.
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