4. It reinforces the value proposition to your potential users or buyers
 |
 |
 |
There is absolutely nothing wrong with providing a free service. If the objective is to only have a free service and it can be funded then go ahead.
But most services are not created to be completely free forever. Even open source software, which originally was viewed as “free” has developed business and revenue models that leverage the value their customers derive from it. Redhat, Suse, MySQL and JBoss are all examples of very successful businesses founded on this so called “free” software model.
For any aspiring profitable business, there is a very clear need to identify upfront what is truly free (e.g downloading and using open source software) and what requires payment (e.g technical support for open source software). Not only does this delineate the difference between free and paid offerings but it also defines the relationship and expectations a customer or buyer will have with the company.
Flickr provides a good example of this in action. You can upload a fixed number of photos for free and share them with anyone, but for a large collection of pictures, there is a small fee ($25 per year for a Pro account). Flickr commits to never deleting your photos, even if you fail to keep your paid account current. They’ll simply restrict your access to them.
So why is this important for customers/buyers? It positions the company very clearly as one that is in business to generate revenue, that will deliver a set of services or offerings that have some intrinsic value that costs actual money, and one that, if successful, will be around in a few years time to continue delivering the service that is being paid for.
I like free stuff as much as the next guy, but if I’m going to commit my time and effort to using someone’s services, I’d like to know that they’ll be around so I can continue to use them. Now, there are plenty of companies that charge for their services that go belly up, but that is not new to the Internet. That’s a simple fact of life for any business. But I’m sure you’d agree that it’s more likely that a company that DOES charge money for their service or has a very clear and scalable revenue model will be likely be around longer than one that doesn’t.
Tweet this: @onpm Why it’s important to think about revenue models right from the start http://wp.me/pXBON-2u6 #prodmgmt #innovation
