Free != Costless

I had coffee with my friend and mentor Neil Baron (blog) this morning. We were talking about methods organizations can use to drive adoption of new innovative products. At the heart of the conversation were tactics to identify the value that early adopters see in products, and how to translate these into benefits that the early majority will recognize and with which they will identify.

For some services and products, it makes sense to lower the price to $0, or “make it free”. If it’s free, and has value, why wouldn’t everyone take advantage of the offer? The thing is that even if the target customer is aware of the solution offered for free, they might not adopt. This is because there are still costs to adopting a solution. The customer still has to do something.

The cost might be as simple as “I don’t have time”. But the cost can also be something that the selling organization has not yet identified as a customer cost. Something like behavior change, or societal perception, or challenges to a personal belief system … These other costs are the key to unlocking the market potential of your product or service. Pricing is important, but holistic picture of your target customer’s costs can dwarf the impact of price.

As an example, take a look at Bose. Bose makes great products. They sound great, they last a long time, customer support is wonderful. Bose products can also be expensive. The brilliant engineers at Bose developed a home theater system with incredibly small speakers. The reviewers loved the product because it was a technical marvel. “How does so much sounds come from such small speakers?” The product sold very well and funded a lot of other products at Bose. And while the product truly is a technical marvel, the wow factor of the small speakers is hardly the sole reason for its success.

The product was launched to address a critical metric in the home theater evaluation process: the Wife Acceptance Factor. What Bose figured out was that every guy wants 901 speakers in their living room. They are big, they are beautiful, they will rock your house whether you are playing Mendelssohn or Metallica. The thing is, once your girlfriend moves in, you get married, you move to a new house, you no longer get to put your huge speakers in the living room. What you see as a beautiful representation of your audiophile sophistication she sees as the ugliest part of your place.

The home theater system that Bose invented solved the problem. The speakers were small so she could hide them, but the sound was big so he could watch Top Gun and feel the jets taking off. The price was high relative to other similar quality products, but the overall cost was lower.

If you have a new to the market product, you will likely have to figure out similar dynamics to succeed. Think about offering the product for free to a limited group, and see what other costs pop up. If you solve those other costs, hopefully, price will be the least of your problems.

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