To Be or Not To Be (FREE!)

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This was presented at the Austin Product Camp 7 - July 2011. Presentation discusses when and when not to adopt the FREE model for one's business.

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To Be or Not To Be (FREE!)

  1. 1. To Be orC.K. Kumar Not To Be Manage Profitably in a world of FREE!
  2. 2. Manage Profitably in a world of FREEDefinitions ofNot Costing or Charging anything - Merriam-WebsterAnything with a hidden or obvious fee - Urban DictionaryC.K. Kumar
  3. 3. Manage Profitably in a world of FREERe-Definitions of 1990 Gimmick ? Strategy?C.K. Kumar
  4. 4. Manage Profitably in a world of FREE Enterprise Business Non-Profit For-Profit  Time  Talent  TechnologyC.K. Kumar
  5. 5. Manage Profitably in a world of FREEWhy Does Work? Benefits Value = Price Price Shipping $5.00 Free $2.50 $2.50 Free $5.00C.K. Kumar Based on Dan Ariely – Predictably Irrational
  6. 6. Manage Profitably in a world of FREEThe Economics of $ Costs Costs, Break-Point Revenues Break-Even Revenues Point Profit Zone Fixed Max. Profits Profits Costs Units Q1 Q2 Q1 ≤ Q n ≤ Q 2C.K. Kumar
  7. 7. Manage Profitably in a world of FREE Business Models Product / SoftwareBusiness Verticals Application Retail / Consumer / Service Products Content Free Altruistic Labor Freemium Cross-Subsidies Pay (Advertising) (Donate) Exchange (Free Trial, (Buy 1, Get (No Free Lunch!) (Donate) Pay for Premium) something Free) Revenue Models Based on Chris Anderson, Author of FREE C.K. Kumar L.Grivet, Consultant, www.Bizmo.it
  8. 8. Manage Profitably in a world of FREE Business Model Challenges Product / Open Right Product / Service Software HARD ! SourceBusiness Verticals Application Social Wild Wild / Service Networking West ADS HARD ! Content Open Content Free Altruistic Labor Freemium Cross-Subsidies Pay (Advertising) (Donate) Exchange (Free Trial, (Buy 1, Get (No Free Lunch!) (Donate) Pay for Premium) something Free) Revenue Models Based on Chris Anderson, Author of FREE C.K. Kumar L.Grivet, Consultant, www.Bizmo.it
  9. 9. Manage Profitably in a world of FREEWhen does work? “FREE” works when  Strategic Approach  Consumer / Retail  Large but fragmented market  Product or Service is useful  Volatile consumer preferences  Strong technology component  Customer acquisition costs are high  Value-chain has deep pocketsC.K. Kumar
  10. 10. Manage Profitably in a world of FREECan you compete with ?Yes! With better customer insight  Why are they paying?  What are they paying for? Articulate your value proposition  Ultra-segmentation With a “Total Solution” product  Free vs. Freemium Leverage your value chain  Build / develop adjacent competenciesC.K. Kumar Based on Chris Anderson, Author of FREE
  11. 11. Manage Profitably in a world of FREECan work for me?Maybe! Value Chain Target Market  Industry / Product Category  Ultra-Segmentation  Value Chain Linkages Customer  Large Enough Size  Psyche  Awareness & LoyaltyC.K. Kumar
  12. 12. Manage Profitably in a world of FREE the Value-Chain C1 P1 D1 S1Creation Total Costs Packaging Distribution Consumption Total Costs = C1+ P1+ D1+ S1 Support C.K. Kumar
  13. 13. Manage Profitably in a world of FREEFunnel the Independent Pet Stores Total Available Rate 15,000 Market Reach 30% 5,000 Adoption 50% 2,500 < 1% 5% 125 Conversion Adapted from “16 Ventures” Presentation on FreemiumC.K. Kumar
  14. 14. Manage Profitably in a world of FREE the customer  Product / Service Category  Consumer Psyche  Nice-to-have Vs. Must-have  Problem-Solution GapC.K. Kumar
  15. 15. Manage Profitably in a world of FREE closing thoughts  FREE can be a very effective marketing strategy  FREE should be consistent with offering  FREE has multiple business models  FREE requires acute customer awareness  FREE should be one of many revenue strategies  FREE is costly !C.K. Kumar

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