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Free: The Future of a Radical Price

Jade Wood - Monday, February 14, 2011

After reading the disappointed reviews for wikinomics, a book that I blogged about earlier, I found some other links that other readers recommended. Namely this book Free - The Future of a Radical Price by Chris Anderson. He was also the author of the Long Tail. A concept which I've read and blogged about but didn't realise there was a book that went with it. Maybe that's the next thing I'll read. The book is very comprehensive and gives a decent job of comparing both sides of the 'Free' coin which was one of the complaints readers had with wikinomics - it was too one sided.

I have just finished listening to the audio and didn't really want to type out what I think is a good summary of the main ideas in the book. A quick google search found me a site that has the abridged version of the book online for you to read or download.







THE TEN PRINCIPLES OF ABUNDANCE THINKING


1. If it’s digital, sooner or later it’s going to be free.

In a competitive market, price falls to the marginal cost. The Internet is the most competitive market the world has ever seen, and the marginal costs of the technologies on which it runs—processing, bandwidth, and storage—get closer and closer to zero every year. Free becomes not just an option but an inevitability. Bits want to be free.

2. Atoms would like to be free, too, but they’re not so pushy about it.

Outside of the digital realm, marginal costs rarely fall to zero. But Free is so psychologically attractive that marketers will always find ways to invoke it by redefining their business to make some things free while selling others. It’s not really free—it’s probably you paying sooner or later—but it’s often compelling all the same. Today, by creatively expanding the definition of their industry, companies from airlines to cars have found ways to make their core product free by selling something else.

3. You can’t stop Free.

In the digital realm you can try to keep Free at bay with laws and locks, but eventually the force of economic gravity will win. What that means is that if the only thing stopping your product from being free is a secret code or a scary warning, you can be sure that there’s someone out there who will defeat it. Take Free back from the pirates, and sell upgrades.

4. You can make money from Free.

People will pay to save time. People will pay to lower risk. People will pay for things they love. People will pay for status. People will pay if you make them (once they’re hooked). There are countless ways to make money around Free (I list fifty of them at the end of the book). Free opens doors, reaching new consumers. It doesn’t mean you can’t charge some of them.

5. Redefine your market.

Ryanair’s competitors were in the airline seat business. It decided to be in the travel business instead. The difference: There are dozens of ways to make money in travel, from car rentals to subsidies from destinations hungry for tourists. The airline made its seats cheap, even free, to make more money around them.

6. Round down.

If the cost of something is heading to zero, Free is just a matter of when, not if. Why not get there first, before someone else does? The first to Free gets attention, and there are always ways to turn that into money. What can you make free today?

7. Sooner or later you will compete with Free.

Whether through cross-subsidies or software, somebody in your business is going to find a way to give away what you charge for. It may not be exactly the same thing, but the price discount of 100 percent may matter more. Your choice: Match that price and sell something else, or ensure that the differences in quality overcome the differences in price.

8. Embrace waste.

If something is becoming too cheap to meter, stop metering it. From having flat fees to no fees, the most innovative companies are those who see which way the pricing trends are going and get ahead of them. “Your voice mail inbox is full” is the death rattle of an industry stuck with a scarcity model in a world of capacity abundance.

9. Free makes other things more valuable.

Every abundance creates a new scarcity. A hundred years ago entertainment was scarce and time plentiful; now it’s the reverse. When one product or service becomes free, value migrates to the next higher layer. Go there.

10. Manage for abundance, not scarcity.

Where resources are scarce, they are also expensive— you have to be careful how you use them. Thus traditional top- down management, which is all about control to avoid expensive mistakes. But when resources are cheap, you don’t have to manage the same way. As business functions become digital, they can also become more in dependent without risk of sinking the mothership. Company culture can shift from “Don’t screw up” to “Fail fast.”


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