Something for Nothing

‘Free’ is quite possibly one of the most powerfully enticing words that a brand can use to describe its products. While many people are wary of such offers having ‘a catch’, it remains that giving a product away for nothing does indeed stimulate interest. Indeed, the past year has seen an upsurge in the use of free products not just as a short-term promotional tool, but as a sustainable business model.

As a result of the recession, the dynamic between consumers and brands has inverted significantly over the last two years. With people more selective about where they spend their money the balance of power now lies with the public, meaning that brands have had to be a lot more generous with their services, even if that means charging nothing.

The sheer availability of products for free on the Internet, albeit often through illegal means, and the resulting ethos of being able to use products at no cost has permeated into many aspects of consumption, with consumers favouring companies that offer their products for free. Websites such as Hotmail, YouTube, Facebook and Skype are all examples of companies that pay for their products through other means, such as advertising, and have been very successful in doing so.

As the cost of providing these goods and services becomes less and less, it means that brands can afford to give away most of their product provided that a few pay for it – with the added incentive of receiving a ‘premium’ service that is better than the free one; this model is otherwise known as ‘freemium’.

Democratization of conventional media practices, such as reality television’s phone-in votes or user content sections of traditional news bulletins have placed the power back in the hands of the consumer; no longer passively dictated to, consumers are active in their consumption and have the ability – as well as the desire – to shape what they see through interactive services such as Sky+ and BBC’s iPlayer.

This ability to ignore has caused significant decline in traditional advertising mediums; the American cable network CBS posted a 13% loss in TV advertising revenue in 2008, contributing to an overall loss of nearly $12 billion for the network. Print advertising has not fared much better – revenue from adverts in US newspapers fell by 17% in 2008.

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Newspapers are investing more and more into online portals to adjust to shifts in demand – although many still prefer the printed medium

All of this revenue loss means that in order to maintain a viable business model, companies wishing to work on an ad-based ‘freemium’ concept must use more directional and targeted advertising to sell to consumers specifically. With the new ability to skip over and ignore advertising, brands cannot afford to pay for ads that are so vaguely targeted in terms of placement – although this is not to say that consumers resent advertising altogether, provided it benefits them in some way.

According to Tom Smith of Universal McCann, almost three-quarters of consumers are happy with advertising support paying for a product rather than having to pay themselves. There are many examples of this today, such as online music website We7 that tags short, targeted ads onto the beginning of each track. ABS Notebooks has found a way to provide free notebooks for college students in the USA; the subject dividers within the books are actually adverts.

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we7.com

In a world of low-cost, fast-turnover consumption, Generation Y puts little value in physical goods, meaning that the old advertising models of creating desire for material objects are becoming increasingly redundant. The economic climate has ensured that a ‘buyer’s market’ is now in full effect, with the consumer calling the shots rather than the retailers.

Value has switched to the intangible; experiences and elicited emotions become the commodities worth paying for, not material goods. In light of this, many brands are being forced to re-assess their position within the marketplace and consider what they can do to ensure they remain relevant.

Those that do soon realise that in order to entice shoppers to part with their money, they must take it upon themselves to offer a unique experience that extends beyond the conventional shopping dynamic that has dominated the High Street for decades.

Many brands such as Dolce & Gabbana have adapted their flagship stores to include exhibition and gallery spaces alongside the racks of clothes, tills and changing rooms, although the most drastic display is arguably found in Paris at Le Studio SFR.

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Le Studio SFR

SFR is the local brand of French Vodafone, and their flagship store in Madeleine features a 200 capacity concert hall, a lounge bar and a restaurant. Free Wi-Fi is available throughout, providing free access to over a million free downloadable songs, amongst 6-metre high animated screens and a dynamic lighting system. Enterprise such as this blurs the line between retail and entertainment in such a way that they become indistinguishable, and customers come away not only content with their purchases but eager to come back for the experience.

UK mobile network Orange’s sponsorship of the RockCorps initiative is another good example; as a phone network there is little in the way of ‘experience’ that they can offer directly. However, through third-party funding and collaboration with a movement that is becoming increasingly popular (RockCorps offers participants free tickets to exclusive concerts in exchange for 4 hours community service) Orange has, through association, taken on all of the desirable ideals of RockCorps.

Singer VV Brown performing at a RockCorps concert

Of course, none of the products are truly ‘free’; they may not cost any money, but the consumer still pays in other ways. The RockCorps ticket, for example, is a reward for taking on a day of manual labour, whereas with We7 the consumer pays with their time spent listening to adverts. Nevertheless, the ‘freemium’ model seems to be a very successful one and as overheads for online products drop, they are also economically viable. Having seen how far the media and retail industries have progressed in the last ten years, it will be interesting to see what the next decade will bring.

James

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2 Responses to “Something for Nothing”

  1. John Taysom Says:

    James – i do agree with much of what you say here. I particularly agree that good content will find advertiser support. And that does not just mean mainstream content – good niche market content will provide strong advertising opportunities for brands that are congruent with the niche. I also support the view that in your words… ‘to maintain a viable business model, companies wishing to work on an ad-based ‘freemium’ concept must use more directional and targeted advertising to sell to consumer’.
    That was what was in my head when I founded we7 – and it is proving to be right: we7 attracts a wide audience (2.5m uniques in UK); retains them for 30+ minutes a session, and despite offering ad free days” for frequent users finds that they are not always claimed – implying the we7 advertising, which you can’t ignore, is well tolerated by users. It is also highly effective.
    Thanks for the comments. John Taysom, Founder, we7.

  2. FFcommunicator Says:

    Traditional marketing is dead. Here’s 10 things you pay for from traditional marketing agencies. http://www.famefoundry.com/1447/10-things-you-pay-for-from-traditional-marketing-agencies

    @FFcommunicator
    Fame Foundry
    Charlotte Website Design

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