The Power of Free – the Freemium Business Model

FreemiumHow do you build a business by giving content away for free?  I wondered this myself when developing my initial sales strategy for Chinese Learn Online.  Here were the issues I had to deal with:

  1. I had no marketing budget.
  2. I had no brand recognition, and thus no credibility with my customers.

My solution? Give my main product away for free!  Then offer an upsell to a paid product.  (This is also known as a freemium strategy).

This solved both issues above.

  1. By making the product free, it attracted a lot of users, who then recommended it to other users.
  2. Using the product sold users on its quality, thus building credibility.

Obviously this freemium strategy only works if you have a good product to begin with.  One that people would recommend to others.

The next issue was what to offer in the upsell.  I had to make sure that whatever it was, the core product had to remain free and completely usable without purchasing the upsell.  Some options here include:

  1. Supplement the functionality of the product.
  2. Provide a more convenient delivery system of the free product.

I used both options in my case.  I sold PDF transcripts of the free audio (the audio was still completely usable without the transcripts).  I also sold a bulk download of the free lesson packages.  This let a user download all lessons of a set together, rather than having to download them for free.

There are many famous examples of the freemium model at work, with people paying for items that can be had in other forms for free.  Many authors have had huge sales of books that are also available in free PDF form.  In this case, users are willing to pay for the physical form over the free digital version.

Can the freemium model be used successfully in your business?

For more ideas based around freemium and other free models, read the excellent book Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing by Chris Anderson.

Save that Marshmallow, and Reap the Benefits!

Marshmallow © by Brief Gasp

Would you pass the Marshmallow Test?  In this test, first conducted by psychologist Walter Mischel in Stanford University in 1972, kids were left alone in a room with a marshmallow on the table.  Those who could hold out for 15 minutes without eating the marshmallow were promised a second one as a reward.  This tested the concept of delayed gratification.  It turns out that those who could succeed in this test as a kid, were also most likely to succeed as adults later in life.  (Read the book Don’t Eat The Marshmallow Yet!: The Secret to Sweet Success in Work and Life (affiliate link) or watch this video to learn more about the test and its results).

This concept plays out in many aspects of life.  In school we are encouraged to study hard at home, while our friends are out partying or playing video games, in order to get good grades that will lead to better career options in the future.  Doctors encourage us to watch what we eat and exercise now, in order to lead healthier lives in the future.

How does this apply to business?  The decisions you make today will affect the future of your business years from now.  Life will tempt you with “treats” at all stages in order to knock you off your end game.  The people who succeed are the ones who can stay focused, put things in perspective, and maintain a long term focus.

All the revenue I earn from my businesses today, are a result of the actions and decisions I made years ago.  If I hadn’t taken all the small steps along the way back then, people wouldn’t be purchasing my products today.  Thanks to that work, I’m now reaping the rewards over and over again today.

Take the time now to find ways to keep improving your business.  That time you spend now will pay off handsomely years from now.  You can thank me then.

Get More Sales Through Unmarketing

Here are some notes I’ve been taking from the book UnMarketing: Stop Marketing. Start Engaging.  If you are interested in purchasing this book from Amazon please use the above or below links, as I will earn a (tiny) commission.

The author, Scott Stratten, defines “Unmarketing” as “the ability to engage with your market.”  There are some great snippets of wisdom here.

“If you believe business is built on relationships, make building them your business.”

Stratten encourages entrepreneurs to be authentic.

“Focus on what you uniquely bring to the table.”

“If you are your authentic self, you have no competition.”

He describes the hierarchy of buying as having the following levels:

  1. Current satisfied customer.
  2. Referral by trusted source
  3. Current relationship but have yet to purchase
  4. Recognized expert in the field
  5. Random searches through ads
  6. Cold calls.

If you are a customer, ready to make a purchase, you are more likely to purchase from someone at the top of the list than from someone at the bottom.  The top starts with a  business that you are already satisfied with.  The bottom, least likely source, would be a cold call from a stranger you have no relationship with, who interrupts you to ask for your business.

If you are spending time and money marketing to people, it would be in your interest to start with position 4 (becoming an expert in your field), and then work your way into moving up to position 1.

Most people don’t do this however, because it takes time to become an expert.  It then takes more time to develop a relationship with your potential customer and become a trusted resource, before finally getting the sale.  So they take the shortcut.  They try to win sales from ads and cold calling that have much lower yield rates.

Are you in your business for the long haul?  If so, are your marketing efforts focused on moving up the ladder?  Or are you sitting on the sidelines, waiting for the easy kill?

How Social Media Changed Marketing

Interesting insight from The Zen of Social Media Marketing: An Easier Way to Build Credibility, Generate Buzz, and Increase Revenue.  If you are interested in purchasing this book from Amazon please use the above or below links, as I will earn a (tiny) commission.

“Social media is not a marketer’s platform.  It belongs to consumers.”

Marketers used to control their message.  They created their own ads, and shaped them how they wanted to be seen.  However, since the rise of social media, consumers now control the message.  Viral messages can be positive or negative about a brand, and no single person can control it.  Users are no longer passive and can now publicly engage with brands, creating new stories in the process.

The brands who are successful now are those who adapt their strategies and embrace social media platforms, rather than ignoring or worse – fighting them.

Which category is your business in?