It is hard to ignore the fact that some of the big players in the Internet economy make millions by giving away their service, or a key part of it, for free. Many people are left scratching their heads, wondering how this model can work.
Can the free model work for you? As a Ecommerce site-0wner you want to consider how much of the house can you give away and still be left with a roof over your head. Somewhere in your business model there needs to be a profit center.
Here are our recommendations for building a strategy around “Free”:
1. Only offer a core product or service for free if you have a clear understanding and business plan of how you are going to convert your relationship with users into one that generates revenue. And, just because Facebook is doing it, don’t think that you can, too! You really need to work out the details.
2. Identify add-ons or enticements that you can offer for free. Shipping is the natural one. Give shoppers some motivation or purchase threshold, such as total order size, to gain these freebies.
3. Be generous with information. Creating and sharing valuable content can really help secure a relationship with your customers. Whether it is through a blog, e-newsletter, or site articles, you can provide a wealth of value for your customers. Of course, you need to weigh the cost of time.
4. Work toward developing a business model that is focused on repeat customers. Long-term customers are so important to a healthy ecommerce business. You can afford to invest in long term customers with initial enticements like free product samples. But if you forget the part about building the long term relationship, your initial expenditure to acquire your customers will be unsustainable.
5. If you are a small business, work on honing your value proposition so it is not strictly based on price. You are usually going to come out on the losing side if you are competing with the big box stores strictly on price. Resist the temptation to underprice what you are selling. Of course, you will need to work your tail off to compete in other ways.
Take a little time to learn about the mindset and strategies of successful Internet businesses. “Free: the Future of a Radical Price” by Wired Editor-in-Chief, Chris Anderson, is a great read. And, of course, you can download the Kindle version for free!
