Who would have thought that in a totally capitalistic society that “FREE” would become the primary method by which modern business models are grounded?
In fact, Free has become such a part of our mindset that we have grown to expect it. Can you imagine paying for LinkedIn or Facebook to do an Internet search? No way. I use an excellent application called Evernote on my iPad to keep notes – no more paper for me. Of course, it’s Free.
The psychology of Free is totally different from “really inexpensive”. Free is frictionless … really inexpensive is not. What smart business people on the consumer side have realized is that pervasiveness is the path to economic riches. Pervasiveness creates traction … traction generates market leverage … and market leverage enables all sorts of indirect economic models (i.e. advertising, data, premium services, etc.)
Recently, I found myself facing an interesting problem - How to leverage “Free” to accelerate a business-to-business (B2B) market without the benefit of indirect economics. In the business-to- consumer (B2C) world – it’s fairly easy. Eyeballs are a sellable commodity. Individuals are willing to put up with advertising in exchange for the benefit of accessing the service at no charge – think of all of those paid keyword advertisements on your next Google search ... In the B2B space this is not true.
In B2B, privacy, security, and ownership of data dominate. Companies will not utilize a service that affects productivity, cheapens the user experience, or compromises the ownership of their proprietary information. Yet, often, those that are tasked with an initial activity or project have very limited budgets and find themselves trading ‘time-to-market’ for the ability to avoid external capital expenditures (i.e. I can’t afford to buy it - but I can build it). Of course, once that activity becomes mainstream in a company, the financial pockets will open - but by the time that happens - a company’s path down a particular road is often locked in – usually to that company’s detriment.
My solution to this dilemma is simple – create a hybrid of the totally Free models used by consumer companies with a pay-as-you-grow B2B business model. General philosophy:
1) Free to develop
2) Free for initial production deployment
3) Pay-as-you-grow in defined and reasonable increments
The benefits of this model are straightforward – postpone the economics required to maintain the service until the company that utilizes the service has achieved production success. This enables the B2B customer to:
1) Utilize a proven platform under which to build their solution
2) Make decisions lower in the organization – speeding time to market
3) Avoid up-front investment through a pay-as-you-grow model.
Ultimately, this provides the B2B customer with the ownership, user experience, and service level that they require.
I call this business model – “Free to Grow”. Ultimately it creates a win-win situation between the customer and vendor. The vendor removes initial friction in order to create higher adoption rates. The customer benefits from this reduction in friction by delaying their costs until a point in time when they are successful. Coming full-circle - the vendor ultimately benefits from greater activity and traction enabling them to provide the customer with an even more robust, highly adopted platform.
At my company, Axeda, we saw companies throughout the entire M2M ecosystem with their hands out – seeking money at a time when the customer was least able to afford it. At Axeda, we are prepared to invest in our customer’s success and in the growth of the machine-to-machine (M2M) market itself.
Be “Free to Grow”.
I spoke with Richard Tehrani, founder and president of TMCnet on this topic. You can view the full contents of that conversation here.