Copy Unlimited blog » Pricing

The true cost of free

Kevin — Fri, 02 Apr 2010 06:00:41 +0000

Easy, yes. Advisable? Maybe.

So it’s finally happening.

Last summer, I heard a radio interview with somebody from News International, who said they were considering charging for access to the online versions of The Times and The Sunday Times.

They were confident that people would pay.

Not me, I thought to myself. Not in a million years.

Why? Because I’ve been reading The Times online for free for over 10 years. And it’s good – but not that good.

And if I’m honest, I’m a bit of an online tart, so I also spend quality time with the Daily Telegraph and The Guardian (or if I’m in a more exotic mood, Le Figaro or Le Monde).

And then last week, the story was confirmed. From June, it’ll cost £1 a day or £2 a week to read the papers online.

I wondered what the reaction would be. I’m often out of step with the popular mood on these things. Perhaps other people – real, sensible, grown-up people – would think it was a good idea, and made sound economic sense.

After all, The Times gets 20m unique visitors a month. If even 5% stay with them, that’s a million people they can ‘monetise’.

Or perhaps not.

When I last looked, the story on the Times site had 472 comments, most of them negative. Some very negative.

And when I clicked on the ‘most recommended’ heading, I saw that a whopping 3,500 people had recommended the top comment. Which tells you how consistent the response was – for every one person posting, eight were simply agreeing with the most recommended (self-perpetuating, I realise) comment.

If I were James Harding, the editor, I’d be worried. Very worried.

Free and easy

Giving something away for free is a great way to attract people. But once they turn up, what do you do then?

A sprat to catch a mackerel is fine: you give a free e-book, or a free hour’s consulting, or a free website critique, because you hope to pick up more, bigger and paid work.

But if you’re giving away everything, as The Times was, then you’ve got a big problem.

It’s all a case of expectations.

Do you charge for your time? I do. So when somebody says “Let’s get together. I’m in Brighton – where are you?” I realise three things.

First, they’re a ‘meeting person’. Second, they don’t value my time – or at least, they’re not prepared to pay for it. And third, they haven’t checked on my website to see where I live and work (I’m often tempted to say “The Isle of Lewis. Why? Where are you?” to see what their reaction is.)

And almost every time, when people realise there’s a price tag attached, the meeting effortlessly morphs into a teleconference or a videoconference. Which is free, of course.

The thing is, people value what you value.

Just the other evening, I had a second helping of pasta at a friend’s house (tagliatelle carbonara, since you asked). And as I twiddled my fork, I suddenly thought how odd it would be to ask for seconds in a restaurant.

“Was everything OK?” the spotty waiter with the off-white shirt would ask.

“Yes, absolutely delicious,” I’d reply. “In fact, it was so good, I’ll have a second helping.”

“Certainly, sir – that’ll be another £11.50. I’ll be right back.”

Free. £11.50. It’s all a matter of context.

The naked truth

Would you walk down the street in skimpy underwear? Of course you wouldn’t (if you would, you should consider seeking help).

But what if that underwear was actually a bathing costume and the street was actually the pathway down to a shimmering blue pool?

But that’s different, I hear you say.

Is it really? Or is it simply a case of perception? You’re still as naked, but it’s just a matter of how it feels.

Free is the same. It’s a perception. You have to create the value first, before you can give it away.

And if you do go down the free route, remember a few basics:

It’s a powerful weapon, but it should be used sparingly. Once, I worked for a company that constantly bundled ‘free’ software with much more expensive software. So often, in fact, that it came to be the norm. And when the freebies disappeared, guess what happened? That’s right – the paid-for software sales fell of a cliff. Now in reality, the free software was a gimmick, and probably sat on people’s shelves or on their hard drive – either way, it was unused. But it had the magic word ‘free’ attached, and that creates value. Taking it away has consequences.
It works one way only. You can make something free that you’ve charged for, but it rarely works the other way around (as James Harding may well discover in June). Lotus, the software company, makers of the iconic Lotus 1-2-3, gave away their word processor, Ami Pro, to boost sales way back in the 90s. Then, they decided to start charging for it. Charging? For free software? You must be joking, thought customers. And nobody bought it.
It should really be free. Not FREE* or Free (++) or even FREE^^^. If you’re going to hem in your offer with endless terms and conditions (what’s the difference, by the way?) then you might as well think of another offer.

So free is easy, but not that easy. You should think long and hard before you start giving things away, and make sure you have an exit strategy.

Much as I have with The Times.

There’s still another two months to go before everything disappears inside a walled garden, but I’m already weaning myself off their columnists, correspondents and diarists.

Easy come, easy go. And I’m going.

Happy Easter.

Find out more:

Pay dirt: The Times and The Sunday Times to charge for use of websites from June at The Times online (but not for long).
Bargain basement: Free: The Future of a Radical Price: The Economics of Abundance and Why Zero Pricing Is Changing the Face of Business (phew) by Chris Anderson, who also wrote The Long Tail.
Give and you shall receive. Don’t know what to do with all those embarrassing A-Ha albums? Try Freecycle.

The risk of reward

Kevin — Fri, 02 Oct 2009 05:00:22 +0000

More doesn’t mean better. In fact, it can mean worse.

A few months ago, I was chatting with a headhunter – no, not the South American type, but one who hunts in the concrete jungle.

He places top people into top jobs in the City of London, the beating financial heart of the capital. Think huge salaries, big bonuses and corner offices with walls of glass.

“So,” I said, “what makes them move? Is it the chance of even bigger salaries and bonuses?”

He didn’t even pause to think.

“It’s never about money. Never. Ever.”

Surprised? I was too. Surely you can never have enough zeroes on the end of your bank balance or big fat carrots on sticks at the end of the month?

Apparently you can.

For after a certain point, money fails to motivate. And that point is not as far down the line as you might think. For even high-flyers in the City are motivated by lesser things.

Like real challenges, new horizons and things that keep them fresh, alert and engaged.

What makes people tick is at the heart of Dan Pink’s talk, which I’ve just finished watching. The surprising science of motivation was delivered to TED Global in Oxford during the summer.

Here’s what I took away from it:

Larger rewards almost always lead to worse results.
Incentives dull thinking and block creativity.
The key to the 21st century can be summed up in three words: autonomy, mastery and purpose.
Google ‘gets’ it (that’s why we have Gmail, Orkut and Google News).

But I don’t want to spoil the talk by giving too much away.

Grab a skinny latte, put your feet up and treat yourself to 18 minutes and 36 seconds of entertainment, insights and sticking candles to walls (no, really – trust me).

If you’re reading this in an email and can’t see the video, click here instead: The surprising science of motivation.

Enjoy.

The pitfalls of special offers

Kevin — Fri, 21 Nov 2008 06:00:09 +0000

Make sure you don’t confuse your customers – and your staff

Just a few days ago, I had a text message from my mobile phone operator.

‘You could call Ireland for just 10p a minute to landlines, or 20p a minute to mobiles,’ it said. All I had to do was send a text to activate the service. And I could check out their website for other great rates.

So I checked out the website. Sure enough, the rates were great. I could call Sydney for 10p a minute. Bratislava for 5p a minute. LA for 10p a minute.

But here’s the thing: my normal rate is 15p a minute to a UK. And I never call Sydney, Bratislava or LA.

Still, it’s a great deal, I thought. So I sent the text message.

Two things bothered me, though.

First, I’d looked into international rates before. And on my pay-as-you-go mobile, they were an eyeball-popping £1.80 a minute to an EU country. Now, that was slashed to just 10p.

I’d also remembered seeing that ‘passes’ were available to contract customers – you pay X, and you get cheap international rates. But the pass was valid for a month.

So I was getting a great deal for absolutely no commitment? A niggling doubt started to niggle.

The second thing was that the acknowledgement text message I received didn’t say the service was activated. Just that they thanked me for my message.

So was it or wasn’t it activated?

Only one way to find out – call customer services.

Who’s sorry now?

And that’s when it all started to go wrong.

‘JR’ (Texan twang, but more Delhi than Dallas) told me that it hadn’t been turned on. But he’d do it right away, and it would be confirmed in five minutes.

Five minutes later, I got an identical text message. Still none the wiser, I called customer services again.

‘Ellen’ (East Coast, but more Bangalore than Baltimore) told me that it had been activated. Great, I said. So I could start making calls to Lithuania for just 5p a minute right away? Or Slovakia? Or New Zealand?

Uhm. Let me check. Screeching on-hold music. Five minutes of screeching on-hold music.

“I can confirm that you can make top-ups as normal,” she said.

So wait, I said. I need to make a top-up to get these rates? On my existing balance, I’d still pay the old rate?

Silence.

“Ellen,” I said tentatively, “are you still there?”

She was. But she’d have to put me on hold again. More screeching.

“Thank you for holding, Kevin,” she said in her too-friendly way. “I can confirm that tou can make top-ups as normal.”

I pointed out that she hadn’t answered my question, and that she was simply repeating her earlier (irrelevant) line.

“I can confirm…” And she was off.

“Ellen,” I said patiently. “It’s a simple question. I’m sure there’s a simple answer. Do I get these great rates just by using my phone right now? Is that how it works?”

“You know,” she said slowly and deliberately, “it’s very confusing for us too.”

It wasn’t meant to be like this

Pricing is complicated enough without special offers that confuse everyone. In my case, I couldn’t help feeling that my mobile operator was being less than honest.

Why were Eastern Europeans getting bargain-basement rates? And if I were a contract customer, I’d wonder why pay-as-you-go nobodies like me were undercutting their expensive passes.

Pricing isn’t a science – it’s an art. And special offers are part of the mix. While there’s no ‘right’ way to do them there are some guidelines you can follow to make your life – and your customers’ – a whole lot easier:

Keep it simple. If your staff don’t understand your pricing, what chance is there that your customers will?
Get the word out. When you launch a new deal, make sure you tell everybody inside your organisation too.
Don’t alienate existing customers. Everybody needs new customers if they’re to grow and expand. And that means special offers – of course it does. But you can’t stop existing customers seeing your ads, browsing your site and chatting to friends (after all, that’s what they do with the phone, right?). So you can’t stop them finding out.
Don’t do it too often. When I was working for a major international software company, one of the subsidiaries in the EMEA region became famous – infamous – for its special offers. It did so many of them that it became expected. When there was no special offer, sales died. Stone dead. They only ever sold software when they had a special – but they had to make a lot more sales to make up for the reduced revenue on each sale.

And that’s it. Now, I’m off to randomly dial people in Sczeczin for 5p a minute.

Why? Because I can.

The value of transparent pricing

Kevin — Fri, 04 Jul 2008 08:30:10 +0000

Whatever happened to WYSIWYP?

I was on holiday last week. And it’s left a little bit of a bad taste in the mouth.

No, not the croissants, pains au chocolat, brioches and and foie gras. They all went down a treat.

The aftertaste I can feel rising in my gorge is the bitter tang of misleading pricing.

That’s right. I flew Ryanair.

Now they’re not alone in this, but they do seem to have perfected the art of turning WYSIWYP (what you see is what you pay) on its head.

It’s a numbers game

I went to Bergerac, in south-west France. And my flights cost just one penny (= 2 US cents) each way. Sure, you’ve got to add the airport taxes, but that’s all, right?

Wrong.

It’s some time since I last flew Ryanair, so I was surprised to discover that I also had to pay a £4 check-in fee each way (previously free) and £8 per bag each way (previously £7 per booking). So that’s another £24.

All told, it was £44. A bargain. So why did I feel hard done by?

Simple. The price I saw wasn’t the price I paid. If they’d said Bergerac £44, I would have been happy to pay it.

And here’s the thing: they could have said £80 and I’d have shelled out without a second thought.

It’s all about expectation.

A few weeks back I wrote about underselling yourself. You can double your price and most people won’t blink. They’ll just pay. But you must quote with confidence and stick to your figure.

Ryanair is unwittingly alienating customers by adding all the extras to push up the bottom line.

Bass motives

There was some small mercy. Ensconsed comfortably in my aisle seat, I fell into conversation with my neighbour, a well-spoken woman with a cello strapped into the seat next to her.

She was off to a week-long music workshop, she told me. And she was really pleased to have got such a good price on the tickets.

Tickets? For her and…oh yes, of course. The cello. So how much did she pay?

“Well,” she said brightly, “it was only £100.”

I gulped.

“For each of us,” she added, patting her cello case affectionately. “How much did you pay?”

I smiled sweetly, swallowed hard, and did what I had to do to make sure her holiday wasn’t spoiled.

I lied.

Find out more:

Need a break? I’d recommend Bergerac (but be sure you book early).

Are you underselling yourself?

Kevin — Fri, 13 Jun 2008 09:30:41 +0000

The fine art of getting the price right

You’re looking for a new digital camera. You’ve checked out the models, the features, the resolution. And you’ve settled on a great bargain.

You can’t believe your luck: a 5-megapixel camera for just £100! It used to be £200, so you’re getting a 50% discount. The nearest comparable camera is £225, so you’re on to a good thing. You’re happy, right?

Not for long.

You read online that a new model is just about to be released – and that’s why this model’s being sold off at £100. Now how do you feel?

Remember, it’s still the same camera you set your heart on. And it’s still £100. What’s more, the new model is £250, which is way beyond your budget. So it’s a great deal, and it’s just what you want. It’s not 7MP, like the new model, but you don’t really need that resolution.

So what do you do? Spend £100 and save £150, with the niggling doubt that your camera is yesterday’s news, or fork out £250 and wonder why on earth you’ve blown the bank?

(If you’re anything like me, you’ll prevaricate until the £100 offer is over – and then regret not going for it. Then you’ll buy the £250 model, and feel regret anyway. Or is that just me?)

Art or science?

Getting the price right is never easy. And there’s simple reason: there’s no right price.

The price is what somebody is willing to pay, not what you’re willing to charge. And it’s about perceived value, not real value (after all, there is no real value – just the cost).

Like Japanese food? You should try Masa when you’re next in New York. Just make sure you’ve got deep pockets. The least expensive glass of wine is $16. The most expensive bottle of wine is $3,200.

And guess how much an Omasake dinner for two will cost? A gobsmacking $800 (no, that’s not a typo).

Naturally, it’s a huge success. It’s only got 26 places – and a three-week waiting list.

Think of a number and double it

Many years ago, my aunt was contacted by a glossy magazine through a friend of a friend. Each month, the magazine featured a sumptuous interior, and needed soft furnishings to set off the luxurious properties.

And that’s where my aunt came in.

For she was in the soft furnishings business. Well not business, exactly. She made them for friends and relatives – cushions, throws, bedspreads, curtains. You name it, she could run it up on her trusty Singer.

They asked her for a quote. She panicked, made a cup of tea, and then called up a friend who had lots of business experience.

“Think of a number,” said her friend. She did, and wrote it down on a pink envelope. “Now double it.” She did. “Now add on a bit more.”

“How much?” said my aunt.

“As much as you like,” said her friend nonchalantly.

And so, she came up with a figure. With horror, she picked up the envelope and showed the astronomical number to her friend.

“That’ll do nicely,” said the friend.

And it did. My aunt submitted the quote, and was immediately offered a contract for a year. 12 months later, she doubled her price. And they signed her up again.

The lesson is simple.

It’s not about price. It’s about value.

Find out more:

Next time you’re feeling peckish in New York, why not head on down to the Time Warner Center and splash out on that $800 dinner at Masa? www.masanyc.com