This certainly applies to the world of physical goods (atoms and bagels). What about digital?
In this iBreakfast we took a deep long look at the digital world where FREE is really big and almost everything online has a zero marginal – once you cover your base there are minimal additional costs. By now everyone in the business gets this.
The real issue is what happens when digital FREE goes after non-digital or quasi-digital business. This is the essence of the FREE attack. We see it in Eric Frank’s Flatworld Publishing company which is going after he high-priced College text book publishers. Flatworld can ride the industry down from $10bn to $1bn because their business model is digitally energized: they get, in effect subsidized professors who developed teaching materials on the job to create textbooks inexpensively and then give them away for free on the web- but then charge for the printed versions and other learning support services.
Tim Fielding at Riverphonic advises mobile clients on dealing with FREE and increasingly this will be an issue – especially as web-based services crowd out the telco’s hold on the phone deck. Additionally, almost every paid or premium web service today is likely to come under a FREE attack empowered by localization (a free feature of mobile) e.g. localized free Yelp vs. Paid Zagats. Likewise Apps are quickly tuning into free ad fodder and so on.
The big question people are asking everywhere is – how do you compete with Free? The answer seems to be (1) figure out how the competitor is being funded and meet or beat that and then (2) offer a better experience (e.g. personalized, pro version or celebrity back) or rely on (3) tribe, community or status tends to trump everything. If people are on your side they’ll keep paying.
Then, take this advice for what it’s worth – FREE.
Note: As we write this report one of our colleagues in the Industry is facing a Free Attack – hope he takes notes. His company charges for higher priced events that give entrepreneurs access to investors. Another group wants to give it away for FREE. But if he follows the above tenets – he should do just fine. Right?