The Notion of Free

Jump to Comments

Chris Anderson, author of the The Long Tail, has a new mantra: Free

The word grabs your attention, but can it hold it? I applauded Radiohead last winter when fans could download the band’s new album for nothing, or name their own price. I love Gmail and WordPress as much as any freeloader. And the New York Times. And, well… Drupal, and more.

But free as an economic driver is limited to products and services mostly digitial (content) or open source (software).

Why?

Napster introduced us to the thrill of piracy and music sharing, but Apple legitimized digital music for law-abiders. Microsoft built a software empire so enormous the only way for many new entrants to compete is by offering products to you for nothing and make money on extra server storage or upgrades.

The notion of free is hardly new. Newspapers flirted with it for several generations because they had a lock on advertising. Thirty five cents for printed newspaper was a bargain when they were just starting to post selected content on the Internet (AOL) in the mid-1990s. In the mass information business, the race to free is predictable.

So then, what about free and the majority of the economy, including more tangible items like $35,000 cars, $500,000 houses, $10,000 kitchen ranges, $1,000 dogs, or $4 cups of coffee?

Most brands (including designer dogs) rely on the psychology of perceived value in appealing to consumers. Why else would people pay more than $100 for a pair of jeans or $50 for a print T-Shirt? Why do people buy organic clothing, hemp shoes, and vegan belts? Most come with a premium price. But these products enable people to share their beliefs and make statements. The same holds true for $3 bottles of drinking water.

Profit margins are too rich to give up. For many goods, the cost of making them might be going down (thank you, China), but savings are not passed along to consumers. They’re being shared with shareholders via earnings-per-share and higher market capitalization. King Gillette’s (Anderson cites a Gillette story on free to build a market) Fusion 8-packs go for just under $25. The company doesn’t want you to buy their Good News disposable blades at 50 cents per unit when it can upsell you on $3 per unit.

Free does have its place in the market. Smart consumers will seek out free where it serves their needs.

But the buying and selling of goods and services will remain part reasoning, part emotion. Experience counts as much as price. Often it’s how something makes you feel, not how little (or nothing) you paid for it.

2 Comments

Filed under Business, Free, Ideas