The free economy

With information freely available online see ease of publishing online), organisations have been forced to give away products for which they previously charged, even when the content is of a higher quality than that of competing sources. Free products or services may be funded through advertising but other alternatives are becoming increasingly popular. The “freemium” model is used in diverse areas, including journalism and the software and music industries, as well as membership organisations. In this model, goods or services are provided free to attract customers, some of whom then pay for additional premium products.

What are the implications?

  • With so much free content online, even a free service needs to offer something unique if it is to stand out from the rest.
  • A need to rethink what has a monetary value.
  • Advertising provides an alternative approach to providing a “free” service, although there is a risk that this would dilute or damage an organisation’s brand.
  • There are many sources of dubious information online, making trustworthiness an important issue. The aggregation of high quality information can itself be a premium service.

Moving forward

  • Does your organisation need to think about a new membership model? For instance, instead of charging an annual membership fee you could provide basic membership or services for free and charge for extra higher value membership benefits.
  • Can your organisation charge a premium by becoming a recognised aggregator of high quality relevant information or “the place to come” for certain services?
  • How important is the revenue from membership compared with other benefits associated with having a larger membership? Is your campaigning more credible with a larger membership? How valuable are members’ contributions to online discussions or live events?
  • How would free membership affect your brand? Would you appear more accessible? Or less valuable or exclusive?
  • Could a freemium model widen your current membership or allow you to develop a distinct new community separate from your current paying members?

Want to know more?

Free does not live up to its billing

Published by: Financial Times, broadsheet newspaper emphasising stories relevant to business

Date: July 2009

Format: Web article

What is it? Broadsheet article analysing the freemium model. It identifies important limitations, in particular that (1) it can lead to a winner-takes-all scenario and (2) the assumption of zero marginal costs neglects the considerable other costs, e.g. for marketing or production.

How useful is this?  Much of the online discussion on the free economy is carried in blogs or brief discussions. Although these can be of interest, this article provides a useful overview from a neutral perspective. The article also presents key data on the “free” economy, drawn from Clive Anderson’s book, “Long Tail: Why the Future of Business is Selling More of Less”.

Other comments:

More on whether we get what we pay for

Published by: Third Sector Foresight, NCVO

Date: October 2009

Format: Web article

What is it? This is a web article on the freemium model and its relevance to membership organisations. It presents a theoretical discussion as well as practical recommendations.

How useful is this? This is a brief article exploring how the freemium model can be used by membership organisations. It follows on from an earlier article by the same author, which introduces the concept. Together, these articles present a useful starting point for considering how these ideas relate to membership organisations.

Other comments:

 

Last updated at 15:27 Wed 30/Mar/11.

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How will this affect your organisation? Have you considered it during your strategic planning? Can you share any interesting relevant links?

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