The Business of Free: Psyched Out

Free Generation | Then & Now |What’s Your Model | How’s That Free | Psyched Out

Every year on a certain day we explore a pagan past by dawning masks and clothes to personify someone else, especially if you are under the age of ten. This annual event brings out kids of all ages for trick-or-treating which we know as Halloween. Halloween just happens to also be a perfect example of two economic phenomenon – the tragedy of the commons and the concept of free. The hysteria brought on by free was in full force this past Saturday as kids sprinted from one house to the next in the pursuit of candy. Quality nor quantity of the candy was of concern as little hands grabbed fistfuls of sweets hoarding their stashes with relentless precision.

We all have an emotional reaction to free. From the all-you-can-eat buffets to the free product samples at the cosmetic counters, we like the feeling of getting something for nothing. How often do we pause and calculate the value or cost of free? We almost never think about the intangibles of free, which is why any good marketer uses the enticement of free to lure us into action.

Let’s consider the example of free business cards from yesterday’s post. Use Google search to look for “free business cards” and Vistaprint will appear at the top of the list. Giving away 250 free business cards works for two reasons. The first is that very few who are looking for free cards purchase are happy with the limitations of the free version and pay for extra premium options that have a real price. Second, Vistaprint needs a much smaller conversion rate of free customers who cross the threshold to buying customers. (Buying customers as defined by those who spend on indirect cross-subsidy products such as car door magnets, thank you notes, etc.)

Free gets us so psyched out that we can very easily spend real money and blame ourselves on the impulse purchases instead of the marketer’s cunning use of free. Sound too far fetched? Then consider the comparison of premium business card charges between some leading print e-commerce companies. Notice when comparing similar products, the prices are comparable and are considerably more than zero. Ultimately, other factors such as quality, customer service, reliability, would carry equal if not more influence than the final price.

Note: Although every attempt was made to accurately quote the product equally between each site, there could be deviation in product which would alter the final price paid.