Marketing The Free

For the record, here is that brilliant and scathing speech of Courtney Love's about free music.

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Marketing The Free

This article was first delivered at a marketing panel at the Software Publishers‘ Association‘s 14th Annual Conference, 13 September 1998, in Chicago.
It’s Here, It’s Misunderstood
Marketing with free product seems like an accepted basis for marketing software today. The authors of the book Unleashing the Killer App readily acknowledge that far from being outside the box, this is a strategy accepted today at the boardroom level.
So I am continually surprised to find that the model is poorly understood, and often implemented in such a way as to handicap it almost completely. That these compromised schemes actually succeed at times, is a testimony to how good the model really is, and the quality of the products that succeed.
We Didn’t Invent It
It’s important to remember that marketing with free product is really as old as time, and is practiced outside high tech circles by, among others, heroin pushers (“first hit’s free, man!”) and car salespersons (the “puppy dog” close).
In both examples, it is impossible for the seller to continue giving away merchandise for free for very long. This limitation is greatly removed in software.
But there is this: when the pusher and the car salesperson give you free product to sample, it is invariably THE REAL THING. They know that they need to give you the unadulterated experience to really hook you.
Why don’t we do this more in software?
The Crippleware Disease
What amazes me is that software execs routinely plan to give away free software, and then disable it in some way. This failure to “put your best foot forward” in what I call the “freezone” defies logic.
I hear it often, and here’s how it goes: “We’ve created a free version of Expand-It, so we can get a lot of people trying it out. But we’ve made sure you can’t save anything. That’s only in the paid product.”
The speaker in this case isn’t getting it. Your goal isn’t to get them to try it out - your goal is to achieve absolute adoption, or addiction. You then have to work back from that goal and define what it will take, for your product specifically, to achieve that dependence.
But you’re going for addiction. So if you’re going to give it away, give it away full-strength.
Getting Them To Try It
Of course, they have to find out about it to try it. Here we have a challenge. Go to Beta News and you’ll find literally hundreds of beta products alone at any given moment. The field is very crowded, and you have to really work on free product dissemination.
That’s why I call this “Marketing The Free”. Because you have to market that free product. If you think that, just because you made it free people will now flock to it, then you haven’t been marketing in the late nineties. Yes, you’d better plan on creating demand for your own demand creation vehicle!
Greg Jarboe, who heads PR for Ziff Davis, is moderating a panel at this conference. He likes to show people how even PR can and must be examined for ROI — it’s expected to sell itself like anything else.
Free Is a Transaction
He’s right, of course, but here’s the flip side: every time you get your audience to think about your product, they are paying you, and that event is an inevitable part of the sequence that results in your getting paid real money.
So, realize that EVERY AUDIENCE INTERACTION IS A TRANSACTION. It doesn’t matter if you’re getting money or not.
Truth is, your audience is doing YOU a favor by reading your reviews, listening to your PR, and trying out your product. They are paying you with something very valuable: their time. The challenge is to get people to do that, to pay you their time. So: you gotta sell it, even when it’s free.
All Of It, For Free, Forever
The most apparently extreme case of freezone marketing is this one: give them the whole product, for free, forever.
This would seem to be pure suicide; but it is unquestionably the most powerful category domination strategy we have in our toolbox as marketers today. And boy, does it work.
A McAfee ad some time ago put it this way: “Some People Think They’re Stealing Our Software”.
Sure enough, you can put McAfee AntiVirus on your machine, and it will never die. And the last I checked, McAfee was a fair success in the antivirus business.
So, how do they do it?
1.    It’s not a totally comfortable experience. I’m not advocating “nagware”, because a little can go a long way toward alienating your prospect. But when your free copy of AV goes past thirty days, it does that darned full scan in foreground every time you start up. That’s allowed.
2.    There’s a licensing restriction: you have to pay for corporate use. In other words, an MIS manager puts it on his network, he’s just written a Purchase Order. This is effective in North America, in great part due to SPA’s efforts.
I know there’s a problem enforcing corporate licensing in many foreign countries, but that will change, and meanwhile there are ways to get conversion in those countries, even with free product. (Hint: it’s done by making the product smart about who is using the product.)
So it’s entirely legitimate to encircle the free product with limitations that get at least a defined portion of your free product users paying. In fact, it’s an essential part of your strategy. Just don’t mess with the perception that the user really gets all of it for free, forever.
Do’s and Don’ts Of Truly Free Software
You can do this:
1.    Signal that it’s out of date,
2.    Create licensing restrictions.
You cannot do this:
1.    Cause the software to die, ever.
2.    Reduce its functionality.
3.    Nag the user too much.
But what about the percentage of users, sometimes as high as 90% and more, that may never pay for the product? Well...
Some of them aren’t your real audience,
Others will eventually become buyers when they get a real job,
Still others never pay for anything anyway,
And they all serve another great goal: they lock out your competitor.
Killing The Competitor
Geoffrey Moore tells us in Inside the Tornado that your imperative in the tornado is to grab every seat. Well, I don’t know a better way of doing that than giving it away.
Many software titles can make good money by licensing only a fraction of their audience; usually the fraction they can compel to comply, such as North American mid-to-large corporations. That’s not bad for an initial revenue goal, because your free user base is an asset you can convert over time.
Niko Mak’s WinZip, which today sits on millions of desktops, probably only collects on less than 1% of that base, which I would try to improve on. Meanwhile, the product:
a.    Dominates its category (its competitors have never dared match its Always Free strategy) and
b.    Gets a healthy revenue stream from corporations and “honor subscribers”.
Not a bad start.
It’s Free Because I’m Selling Something Else
There’s another great reason for giving away a product for free: when you’re selling something else. This is truly the kiss of death for a category: when a vendor has decided it can give it away to sell something else it owns.
Actually Netscape started this with their endless free betas of Navigator. They were really selling a line of servers, and succeeded at that. They even succeeded in getting Navigator into revenue, which was probably a mistake, since Microsoft came along with the very same strategy, and Netscape, having gone public by then, was locked into charging for their browser.
Just think: had Netscape held the line and never charged for the browser, it might still be king today.
The vendors who piggybacked on Microsoft’s early Internet Explorer efforts did well, when they honored the model. Look at WSJ Interactive, which was offered in full for a healthy free period in IE3, and has since become perhaps the greatest success in paid online publishing.
When Microsoft was planning IE4, the company I was working for had the chance to get its world-class meta-searching utility placed for free inside IE4, but turned down the opportunity because reluctant execs didn’t see the value, or worried they wouldn’t get into revenue. Where is that product today? For that matter, where is the company?
Dominating The Category
The Always Free strategy is a killer weapon in crowded categories.
For example, MicroHouse couldn’t get their product Imagecast noticed in the workstation-cloning category. Since what was so great about its product was its ability to multicast, I advised them to give away a version that did singlecasts for free, forever. They quickly got tens of thousands of registered users, got noticed, and in the process slammed their single-caster competitors. Now they are getting ready to take over their category with a new version.
Another example is a company in which I am a principal, called NetVital Technologies. We have a database replication product, and have chosen to give away the full version, requiring payment only when the product is put into corporate end use. This not only allies consultants and integrators who get to use it for free, but it also hits a key competitor that sells to those consultants.
New Category Definition
Finally, this strategy is great to establish a new category. If you do this, be sure to have your feedback lines wide open, because the early adopters who play with the free product will help you define it in directions you hadn’t thought of originally. In the game of category definition, the only voice that matters is the end user’s.
A company I know has a great desktop firewall product. Network security gets lots of interest, but that doesn’t mean a lot of POs get cut to the smaller vendors. I have advised this company to give out the desktop firewall broadly and totally for free. Will this get them market share? Duh. And since software is essentially a subscription product, the revenue will come.
When you fail to get aggressive market share in a new category, you will get noticed by a large competitor, who will be happy to learn and profit from your pioneering efforts.
It may take a while to get to revenue in a new category using the Always Free strategy, but at least you’ll lock out the competition long enough to get there.
The Achilles Heel of Free Product Trial
Assuming you can effectively get your free product in the hands of most of your target audience, your biggest headache will not be how to get into revenue, but the quality of your product itself.
I don’t know about you, but I quickly dump most of the free products I try out. This is a horrible waste. Somebody spent a lot of time, money and energy getting to me, and then I take one look at the product and throw it away. Worse, I’m likely to give it bad word of mouth, and I’m unlikely to give a later version of that product a second chance.
This is true even in “beta” products. You can have some rough edges in beta, but very few these days.
In the freezone, you had better have a product that:
works as advertised,
is easy to use,
has a great tutorial or orientation, with wizards and so on,
makes it easy for the user to assemble important components.
The fact that it’s free has nothing to do with it. In fact, it is far more critical to get the free product right than the paid one, because at least you have some loyalty when the person has paid money.
There is a little more tolerance with established vendors, especially in IT software, but not much. If you’re unknown, your ONLY chance is a flawless freezone experience.
It Doesn’t Work In Purple
Here’s a common objection I get to the idea of distributing product for free: “OK, that worked for browsers and anti-virus, but we have a densitometry server, and that’s a specialty product. It’s not going to apply to us.”
I think at this point you will have to prove it to me that it won’t work for some product. I mean, if letting someone take a car home for the weekend greatly helps sell it, why wouldn’t it work for a truck? It’s still an individual getting addicted, and you are marketing to individuals.
More Misconceptions
To round out the exploration of Always Free, here are a couple of other misconceptions you may run into.
“Piracy Is Bad”
Of course piracy isn’t good (after all, this is the SPA!), but even Bill Gates owes much of his success to piracy, and candidly admits it.
Savvy software executives recognize that widely pirated products do become the currency of their category.
Remember when Borland’s Quattro blew right into Lotus 123’s space? That was mainly on the strength of “no copy protection”, and not much else.
The problem with piracy is that it’s hard to control. The better course is to implement an Always Free strategy that limits your exposure and gets you to revenue. Once you have converted users into your paid licensing space, police it aggressively.
“If It’s Free, It Couldn’t Be Valuable”
This is an odd one that I hear regularly: “if we give it away, users won’t think it’s worth anything”.
I think Microsoft has "put paid" to this argument. Internet Explorer and Outlook are good products, and what’s more they are perceived as good.
I think users know they are paying, even when they get it for free. So I do think this is a misconception you must put aside.
Instead, construct an intelligent freezone strategy.
The Lesser Free Strategies
I’ve devoted most of this presentation to the Always Free model, because it is, as I see it, superior by far.
But I think it’s worth examining the other flavors of Free. They have their drawbacks, but you may not be able to convince your management to go with Always Free, and any free is better than none at all.
The 30-Day Trial
This is the absolute basic freezone strategy, and it’s not bad. Problem is, thirty days isn’t a very long time, everyone does it, and as usual Microsoft has upped the ante with 60- and 90-day trials.
Also, when you promote your product on places like, it will be labeled as “demo”, when it would be freeware in the Always Free model.
If you go with a 30-day trial, then every user experience will be crucial, so make it a highly interactive experience, and basically convert the user as directly as you can.
Also, I strongly suggest you make it easy to renew the trial. I mean, let’s say someone installed your trial software but never got around to checking it out, really, and then the 30 days are up, and he can’t reload it! Aim at foot, press trigger. This user is actually being prevented from trying your product!
The Extended Trial
Microsoft runs longer trials. This works well with expensive products that have long use cycles such as Project.
The fact that anyone can download a 90-day free trial of this product means that I can share my gantt chart with anyone during a planning period, and they can leave the buying decision until later.
I’m intrigued by longer trials, but in any company outside Microsoft I would try to make the product interactive enough to try to motivate purchase during that period. It’s a long time to wait.
Lite Versions
Eudora popularized this method by distributing a simple Eudora Lite to millions of users and letting them upgrade to a powerful, paid Pro version.
This made Eudora king of email clients until Microsoft came along with a free product that actually had more functionality than Eudora Pro. It’s still early, but the signs are clear: the war is lost.
Was this inevitable? No. I believe the Pro version should have been free. This way, users would actually have known what was so great about it. The percentage of paid users would have been about the same, and Microsoft would have had a much harder time entering the space. As it was, it was relatively easy.
In the end, Eudora did all the educating for MS. This is a predictable outcome when you market with Lite product that actually doesn’t put your best foot forward on the Net.
What The Market Teaches Us
Put your best foot forward! That’s the lesson the market has taught us about the freezone.
Designing such a strategy is far from easy, and many factors can prove nearly insoluble. But if you want to have a true category-dominating hit, I believe you must confront those issues and resolve them with energy and care.
Do your best to implement what I believe to be the most effective strategy, Always Free. If for political or other reasons you can’t, then implement one of the lesser strategies.
And do share with me what else you learn on this exciting frontier. I’m always available at my permanent address. Do stay in touch.
Good luck!

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