C.K

. Ku

mar

To Be or Not To Be

Manage Profitably in a world of FREE!

Manage Profitably in a world of FREE

C.K. Kumar

Not Costing or Charging anything - Merriam-Webster

Anything with a hidden or obvious fee - Urban Dictionary

Definitions of

Manage Profitably in a world of FREE

C.K. Kumar

1990

Gimmick ? Strategy?

Re-Definitions of

Manage Profitably in a world of FREE

C.K. Kumar

Business

For-Profit Time

Talent

Technology

Non-Profit

Enterprise

Manage Profitably in a world of FREE

C.K. Kumar

= Price

Benefits Value

Price Shipping

$5.00 Free

$2.50 $2.50

Free $5.00

Why Does Work?

Based on Dan Ariely – Predictably Irrational

Manage Profitably in a world of FREE

C.K. Kumar

Costs

Revenues

Profits Max. Profits

Costs,

Revenues

$

Units

Q1 Q2

Profit Zone

Q1 ≤ Qn ≤ Q2

Fixed Costs

The Economics of

Break-Even Point

Break-Point

Manage Profitably in a world of FREE

C.K. Kumar Based on Chris Anderson, Author of FREE

L.Grivet, Consultant, www.Bizmo.it

Business Models

Free

(Advertising)

Application / Service

Product / Software

Bu

sin

ess

Ve

rtic

als

Revenue Models

Altruistic

(Donate)

Labor Exchange

(Donate)

Freemium

(Free Trial,

Pay for Premium)

Pay

(No Free Lunch!)

Cross-Subsidies

(Buy 1, Get something Free)

Content

Retail / Consumer Products

Manage Profitably in a world of FREE

C.K. Kumar Based on Chris Anderson, Author of FREE

L.Grivet, Consultant, www.Bizmo.it

Business Model Challenges

Free

(Advertising)

Application / Service

Product / Software

Bu

sin

ess

Ve

rtic

als

Revenue Models

Altruistic

(Donate)

Labor Exchange

(Donate)

Freemium

(Free Trial,

Pay for Premium)

Pay

(No Free Lunch!)

Cross-Subsidies

(Buy 1, Get something Free)

Content

ADS

HARD !

HARD !

Open Content

Open Source

Wild Wild West

Social

Networking

Right Product / Service

Manage Profitably in a world of FREE

C.K. Kumar

“FREE” works when Strategic Approach

Consumer / Retail

Large but fragmented market

Product or Service is useful

Volatile consumer preferences

Strong technology component

Customer acquisition costs are high

Value-chain has deep pockets

When does work?

Manage Profitably in a world of FREE

C.K. Kumar

With better customer insight

Why are they paying?

What are they paying for?

Articulate your value proposition Ultra-segmentation

With a “Total Solution” product Free vs. Freemium

Leverage your value chain Build / develop adjacent competencies

Yes!

Can you compete with ?

Based on Chris Anderson, Author of FREE

Manage Profitably in a world of FREE

C.K. Kumar

Can work for me?

Maybe!

Value Chain

Customer

Target Market

Industry / Product Category

Value Chain Linkages

Psyche

Awareness & Loyalty

Ultra-Segmentation

Large Enough Size

Manage Profitably in a world of FREE

C.K. Kumar

Creation

Packaging

Distribution

Consumption

Support

the Value-Chain

C1 P1 D1 S1

Total Costs = C1+ P1+ D1+ S1

Total Costs

Manage Profitably in a world of FREE

C.K. Kumar

Reach

Adoption

Total Available Market

Conversion

Funnel the

Adapted from “16 Ventures” Presentation on Freemium

15,000

Independent Pet Stores

5,000

2,500

125

30%

50%

5%

Rate

< 1%

Manage Profitably in a world of FREE

C.K. Kumar

Product / Service Category

Consumer Psyche

Nice-to-have Vs. Must-have

Problem-Solution Gap

the customer

Manage Profitably in a world of FREE

C.K. Kumar

FREE can be a very effective marketing strategy

FREE should be consistent with offering

FREE has multiple business models

FREE requires acute customer awareness

FREE should be one of many revenue strategies

FREE is costly !

closing thoughts