Do customers still want free stuff?

There is no such thing as a free lunch, it’s a sentiment as old as time itself, yet it still holds true as gravity. In a business model, if someone gets something for free, someone else foots the bill. In the last five years or so, organizations have found the ‘free’ multi-faceted platform to be highly innovative and effective, turning traditional ways of transacting upside down.

In a free business model, a substantial customer segment continually benefits from a free offer, which is funded by another part of the model or customer segment. For example, RealEstate.com.au is a platform that lists properties for sale and rent for people to search and apply for free, instead of charging real estate agencies to display their properties.

However, the most popular and captivating of these models is the ‘Freemium’, which is where you get the basics for free and pay for the full version. Often the free offer is offset by paid advertising that is displayed to users as they use it. It is quite effective when marketing smartphone apps and software to the masses because there is no risk for the customer to try the product, therefore it maximizes uptake, and then once they enjoy the features, they will continue to use it. This generates revenue from advertising or users paying for the full version. Now, while customers have been quite happy enjoying the free versions for years, they are beginning to change their behavior.

Take Spotify, the popular music streaming service, as an example. It offers users free access to almost all music tracks, artists, and podcasts on demand, right at their fingertips. It’s free to use if you don’t mind the occasional ad here and there between your playlists. Or even YouTube, which provides free access to unlimited amounts of video content so you can watch and get lost, but be prepared to see ads at the beginning and pop-up banners during.

That’s all well and good, however, with ad saturation on all of these platforms moving forward and really pushing the boundaries of customer experience and usability, market trends are starting to shift again. People are starting to see the value of ad-free subscriptions so they can get all the benefits of the product without the interruptions and distractions of ads. So instead of just putting up with loud, jarring advertising in between a client’s music streaming at the gym, they now choose to pay the monthly subscription to get the premium benefits.

This is an interesting change for Marketing, since just a few years earlier, the customer was being pleasantly surprised to actually receive a service for free. It caught vendors and organizations off guard, as it was revolutionary not to charge customers for a product. Most digital products and some innovative physical ones enabled this paradigm shift, and it was very profitable; however, after years of this, the average person is becoming fed up with the extrinsic, non-monetary costs associated with its free use, and organizations are now seeing a demand for ad-free versions. This means that the typical modern customer who is quite used to not paying is now learning to pay again because the ‘cost of free’ is reducing his utility.

What a crazy, confusing and logically challenging statement! Yet it is happening.
In truth, it’s not like the cycle has reversed exactly to how things were before the free trend; every industry is seeing a breakthrough in the way customers interact with and use these products. For example, with music, it’s not like people are paying $30 for a physical CD again. The general market and the way a customer consumes music went from free to subscription-based ad-free streaming. This seems to be the new and highly accepted trend now, which is being adopted all over the world.

There has also been an increase in ad-blocking software, which is another threat to the Freemium model, especially on social media platforms like Facebook or YouTube, as these “cheater” customers receive all the benefits for free without having to to pay”. ‘ the exchange of announcements.

It’s an interesting trend, and it will be even more interesting to see where innovative thinkers take organizational models next.

What are your thoughts?