Wednesday, 18 August 2010

The true cost of free

With changes taking place in public sector spending money, or rather lack of it, is hot on everyone’s lips. As a social sector it is something people don’t like to focus on and yet we seem to spend a lot of time discussing it. The route of the problem lies in a passion for making a difference and something implicit in the idea that making money feels unworthy of a greater mission in life.

And so the notion of “for free” dominates the sector. Entrepreneurs running their enterprises on a shoestring and favours; a reluctance to place a value on a service over and above its marginal cost; and the plethora of Free conferences; Free workshops; Free business support; Free networks that have been available over the past few years.

Let’s focus on the latter group for a second. Free at the point of delivery has a tangible cost. It just happens to be shouldered by someone else – and in many cases that someone is you as a tax payer. The question to ask is what value do you actually get from Free?

In reality, the further the distance between the user and the payer the less likely you are to get your needs met. How hard to do you think about committing to something that you don’t have to pay for? How often have you walked away from something free with a shrug – and the thought at least it didn’t cost me anything? What incentive does the provider have to exceed your expectations and delight you with their service? Unlike a paid for service they don’t have to work that hard to get new customers.

And just because something does not cost you the “hard stuff” does not mean there is not a cost. Think about your time, and what you could usefully have been doing instead.

The truth is that when you have to pay you make sure you are getting something of value. And any provider with paying customers is reliant on delivering that value to future proof their business.

There is of course a place for free. But it should not be about handouts, donations and begging bowls. Free should be part of your “added value, going the extra mile" service offering, it should be used to get people to experience your service before they buy, and used as a reward for good customers. And all of this should be built into your business model and your sales funnel. Anything else under values what you do and what your customers ultimately get.

For the sector to move on we need to put for free in its rightful place. We need to value what we do and charge for it. And we need to value what others do and be prepared to pay for the value we get.

The real question to ask of any service is this: Would I pay for it if I had to? If the answer is no, then the value to you is clear.

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