After Roy Dunbar gave a great briefing on the small business success index and up for our keynote is Chris Anderson, Editor of Wired and author of Long Tail and Free. He is Chris is talking about Gilligan’s Island – watched by 60% of households afterschool. That was all we knew because our choices were limited.
We learn more about our own taste as we are given more choice. In the 20th century we had scarcity of distribution – shelf space, store space. You product had to do extremely well to get seen. With the growth of the web niche audiences allowed the Long Tail to be a profitable space.
Part of our needs are satisfied by mass market offerings but another portion is linked to niche audiences.
The 20th century was the era of the big firm and the 21st century has seen that turned on its head.
The smartest people are not usually the people you work with but what if you could find those smart people or rather let them find you.
Our traditional model of big companies reaching big markets does not address the entire opportunity.
It is most likely that the little guy will scale up faster than the big guy scale downward. Because the moment you start a web site you are a global company.
It used to be when you wanted to start a company you had to make a huge investment. Now, you can start a business for a few hundred dollars.
Now let’s talk about the concept of Free.
It actually started in 1896. This was the dawn of the consumer packaging era. You had a general store with meats and produce and nothing in boxes. You didn’t have refrigeration back then and most things did not have a good shelf life.
A company bought this failed product called “Jell-O” and they didn’t know how to sell it. This was a medicine company that delivered medicine and thought “what if we delivered these products door to door”? There was a lot licensing for selling but there was a loophole that they could give away things so they printed 5 million recipe books on how to use Jell-O. They went door-to-door and there was a rush to the general store to buy the product. The razor and razor blades concept came soon after that which demonstrated the power of FREE.
You are not really getting it for FREE. You are paying for it, but not now, just later.
Then a new form of free came about in the digital world and that is what we distinguish between “atoms” and “bits”. You can produce bits at almost no cost and it is deflationary (cheaper as time goes on).
Google has almost 300 products and they are almost all free. The use search to subsidize everything else.
Freemium allows you to sample a product until you know you want more which is usually when you have to pay for it. The best thing is that when you convert to the paid version you become very loyal.
Biggest fact about freemium is that when people become paid members the churn is the lowest of all types of sales models.
A few places to look at where the Freemium model is doing well:
- Music Industry
- World of Warcraft
- Second Life
So for your business, you should look at all kinds of things that you can give for free to enable your own Freemium model.Google+