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'Free' and Cause-Related Marketing: Part I

Of a sudden one of the hottest marketing concepts around is ‘free.’ But is free sustainable or even possible for organizations that are already not-for-profit?

I’ll tackle that question in Thursday’s post.

But first, what is ‘free’?

On a recent show, Oprah told her viewers that Suze Orman’s book Women and Money could be downloaded for free from Oprah’s site for 33 hours. During that time 1.1 million copies were downloaded in English and another 19,000 in Spanish.

The graphic above… from TitleZ via the blog longtail.com… shows that sales of the book on Amazon improved dramatically after the giveaway.

That example comes from author Chris Anderson, who says that Free is being driven by the declining costs of digital processing, storage and bandwidth. Anderson, who is the editor of Wired magazine and the author of influential book “The Long Tail,” has another book coming out soon on the business value of giving it away for free.

What other examples are there?
  • Google, which gives away software, electronic storage space, email accounts, this blog and countless other items, is nonetheless one of the most profitable companies in technology.

  • And who hasn’t by now used the also profitable and mostly free craigslist.com?
You see the approach used everywhere nowadays. Here’s some examples from the Amsterdam-based outfit Trendwatching.com.
  • There’s free printed magazines and newspapers. And lest you think this is only some large market ploy, there’s even one in my small market handed out on the train platforms on weekday afternoons called The Buzz.

  • In Europe there’s Blyk, a free mobile telephone service for 16-24 yeaar olds powered by advertising. Even for the regular mobile services, handsets are often free when you subscribe to a plan.

  • In Austria and Germany you can get a nearly free Smart car for the price of one euro a day. The car is plastered with advertising and you must agree to drive it about 20 miles a day.

  • In France you can get free photo processing and home delivery from MesPhotosOffertes. The photos come with 4x15cm tear-off strip of ads.

  • Last July music artist Prince gave away some 3 million copies of ‘Planet Earth,’ his latest release in London’s Sunday Mail. In August, he sold out 21 performances in Wembley Stadium, each one with 20,000 paying concert-goers.

  • On it goes; free drinks in Japan from vending machines, free college textbooks in the United States, free travel guides in Europe, free Wi-Fi in a lot municipalities, free GPS units in New York. Etc.
Wait a minute, you say, there’s no free lunch. These things are supported by advertising, or concert-goers, or some such. Well, yes and no. Google is supported by advertising. But unless you live in one nine U.S. cities (out of 450 worldwide) where listings cost anywhere from $10 - $75, Craigslist is completely free to you. It’s not so different with Flickr.com. The average user could exhaust herself with the many free features of Flickr before she would have to pay for their premium service called Flickr Pro.

So how do these outfits survive? They have to meet payroll and pay for paper or Smart cars or photo finishing chemicals, right?

Chris Anderson helpfully provides “a taxonomy of free.” But there’s one item he doesn’t mention. Oftentimes these outfits run very leanly. Craigslist is said to have a staff of less than 25 people, with whom it achieves sales of something more than $15o million a year! (That's $6 million in sales per employee.)

Freemium

While there have long been giveaways offered as enticements… think of Mrs. Fields cookies, for instance… the ‘bait’ typically is only offered in tiny quantities. By contrast, in the digital age when the incremental cost of processing power and bandwidth and digital storage space approaches zero there’s a whole different kind of economics in place. So, in effect, something like 1 percent of craigslist users pay the
freight for the other 99 percent.
Advertising

Advertising allows content, services, software, free college textbooks and more
to be free to all.
Cross-Subsidies

What’s free is any product meant to persuade you to pay for something else.
Those free CDs in the newspaper from Prince were made possible by the 420,000
paying concert-goers a month later. For that matter, cross-subsides power
over-the-air television in the United States. Advertisers make possible all that
free news and entertainment.
Zero Marginal Cost

“This describes nothing so well as online music,” writes Anderson in his article
in Wired. “Between digital reproduction and peer-to-peer distribution,
the real cost of distributing music has truly hit bottom. This is a case where
the product has become free because of sheer economic gravity, with or without a
business model. That force is so powerful that laws, guilt trips, DRM, and every
other barrier to piracy the labels can think of have failed. Some artists give
away their music online as a way of marketing concerts, merchandise, licensing,
and other paid fare. But others have simply accepted that, for them, music is
not a moneymaking business. It's something they do for other reasons, from fun
to creative expression. Which, of course, has always been true for most
musicians anyway."
Labor Exchange

When you vote on that exquisitely-rendered reply to some question on Yahoo
Answers, you’re creating value or improving the service for the next user.
That’s a labor exchange.
Gift Economy

Wikipedia is part of the gift economy, whereby smarty-pants type people,
motivated by something like altruism or pride, are creating the world’s most
extensive and free encyclopedia. Altruism also motivates freecycle.com, whereby
an object of value can be yours if you’re willing to just haul it away. Some
similar motivation is behind CouchingSurfing, which matches people willing to
put up a stranger for a night or two with people looking for a place to
stay.

In Thursday’s post; how to make free work for your nonprofit or client.
Labels:

Comments

Anonymous said…
Hey Paul, Great post. Looking forward to what you have to say on Thursday. As you know, I'm a big believer in free! I'll link to your Thursday post with some past posts I've written and maybe something new. Thanks for giving me the chance to blog on my favorite four-letter word. Joe Selfishggiving.com.
2/26/2008 1:51 PM
Anonymous said…
Paul, very nice freebies overview. Really loving your comprehensive posts. Keep up the good work and check out m-cause.com

--Ryan
3/02/2008 1:24 PM
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