The Value of Free

I'm always on the lookout for ideas that big companies use to great effect, that can be used equally well by small and medium size companies.  In the article "Loyalty at Work" by Kevin Zimmerman in the Sept/Oct issue of www.1to1media.com he reports on the success of Best Buy's Reward Zone program. 

Originally, when Best Buy conceived their 'points' program they charged a one-time fee of $9.99 to join.  In an effort to grow and revitalize the program, they made it free. "Membership jumped from about 8 million to just shy of 30 million."  This increased the buyer pool of customers looking at offers by almost 4-fold.

Ok, so you see the obvious benefit of 'free' in that case.  But perhaps you are struggling with the issue of 'bird in the hand' revenue for your business. You want to get the short-term revenue you derive from a one-time membership fee vs. increasing your potential buyer pool. 

How do you decide what's best for your business:

If you are in the position of trading a smaller one time membership for potential larger long-term sales, consider the latter. 

If you are thinking about an ongoing stream of monthly revenue in subscriptions vs. free, consider the former.  Make sure to apply the value of 'free' when it makes the most sense.  Not everything can or should be a free offer, contrary to what you are hearing online these days.

Comments

[Mark]

Good point on the value of FREE. My client and I were discussing what "FREE" value would attract her clients more, a service or a product.

She provides bridal makeup services and we have noticed some competitors offer free makeup kits and others offer a package deal which includes a "free" service and almost all competitors offer free consultation.

In the end, having too much "Free"dom can hurt a business.

[Levon]

Point well taken, using big enterprise techniques on the internet for small businesses can be effective.

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