Consumers are interesting creatures. If we have to pay for a service and are not happy with that service, assuming other options are available, it is easy for us to walk away. But when a service is free and we're not happy with our experience, we often choose to just let the service sit indefinitely, instead of cancelling the subscription or membership thereby simplifying our lives. Consumers love free; it's the same reason why we have tons of crap in our house that we really don't need; "I really didn't need another coffee grinder, but it was free."
I was on a recent business trip where I forgot to check my free web based email account. To my dismay, I failed my son by missing a birthday invite from the parents of one of his friends. This is an account that I don't use often, so it's not checked every day. Unfortunately, by the time I saw the email it was too late to make plans to attend. At first I was angry at the parents for not using traditional paper invites like every other student in my son's class, but I quickly realized I was just looking for excuses to not blame myself. But my attention quickly turned to my free email provider. Why was it that I used this account so infrequently? Why is it that many of us have multiple accounts. The answer is usually pretty simple; we use different accounts for different purposes and the reality was that I really wanted to use this account, but the service quite simply sucks. So why not cancel it? Well, it's free. Besides, I would have to update all the people and companies that do send mail to this address. So instead of just cutting bait, I choose to login maybe once per week. The login process and time required to download my mail is so painfully slow, I can only put myself through that torture once per week.
So What Is The Cost of Free?
Interestingly enough, this phenomenon happens with many services across many industries every day. The sad truth is that the cost of free can be quite expensive for both the consumer and the business providing the service. For me as the consumer, I paid the cost of a disappointed son, parents who are offended that we didn't attend their son's party, and the time cost of managing multiple email accounts because each has different benefits (while this one account is slooow, the email address is real easy for people to remember). For business owners, if the service is truly bad, but free and non-evasive, they end up with up bunch of inactive accounts on their books. An inactive account is overhead and overhead is bad. If you're running a service business online, inactive accounts are taking up space. Each account has data that must be stored and backed up, even if the person only logs in once per month. Then there is the liability of holding that person's data. In the event of your business being compromised and data stolen, you now have a pissed off customer who wants to sue you for the potential identity theft that may occur later, and they haven't added a single dime to your bottom line. LinkedIn has millions of members, but how many actively use their accounts in any given month?
If you're a business owner looking to grow your empire with free memberships, go for the new customers that will be actively engaged. It use to be that just getting subscriptions was enough to build an ad-based business model, but even on those web sites, advertisers are demanding more and more for active eyeballs on the screen. An engaged audience usually means a happy audience. And a happy audience will bring in more customers. Just remember your product has to work to keep all of those members. If you don't believe this strategy will work, just look at Facebook - it's free, makes people happy to keep in touch with friends they wouldn't otherwise call, and it's reliable. Now go make your billions.
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