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NOTABLE! Unpopular Opinion: "Give Value for Free" is Bullshit More Often Than Not

Discussion in 'General Mindset, Motivation, Beliefs' started by AgainstAllOdds, Oct 27, 2018.

  1. AgainstAllOdds
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    AgainstAllOdds Legendary Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    I know that this opinion on this forum will be unpopular, and that it goes against what all the gurus teach, but after years of reading stories of misled entrepreneurs, I needed to make a post.

    Time and time again I see people following this business model:

    Give value for free --> People will eventually start paying you. --> You'll be rich.

    The theory preached behind this "model" is that to make money, you have to give people value (upfront). You give them value. They understand your worth. And then if they so choose, they'll give you money.

    Ok. Nothing wrong with that. However, I want to point out that this model is nothing more than a funnel. It's a marketing tactic.

    It has a lot of pitfalls and potential traps for starting entrepreneurs.

    For the majority of businesses, it is not a "business model" that you want your business to be centered around. It is one of many tactics that you want to try out before deciding where to allocate your sales/marketing budget, but not something that you want to bet the house on before looking elsewhere.

    The biggest problem with the model is that it comes with the requirement of giving value upfront. You give before receive. In a large number of scenarios that could work, but there's one key point that this sort of thinking leaves out:

    99% of people will only give you money for FUTURE value. They don't give a f*ck about what you did for them for free before.

    Let's go through an example of a bakery in multiple scenarios:
    A bakery wants to sell more cookies. To sell more, they have a person stand outside giving samples away.

    Scenario #1 where things go well:
    Because enough people try and taste the samples, a few realize that the cookies are good, and end up buying a dozen cookies each to take home. The bakery is ecstatic and considers it a success. They end up building their entire business model around giving away samples for free.

    Scenario #2 where things go bad:
    People try the cookies. Eat as many as they want. End up buying no cookies because they already got their sweet fix for the day. Tomorrow, or whenever they choose, they know they can get another cookie for free, so they end up buying none. The bakery goes bankrupt and the people feel bad, but not to the point where they'll donate to open the bakery up again; they'll just buy they cookies from now on.

    Scenario #3 the default scenario without samples:
    A bakery puts great looking cookies in the window. Whoever wants cookies, comes and gives them money for cookies.


    Using this example above, gurus will tell you that Scenario #1 is the only way that you can build a business. You need to give value upfront before having a chance to receive value.

    Bullshit.

    Scenario #3 is the most common scenario for a reason. How many of your local bakeries are giving away top quality samples all the time for free? They might do it once in awhile, but there's little to no chance that they're doing it everyday, and if they are, they're only giving you a taste.

    This is the same reason why Groupon doesn't work for most businesses.

    Or why all the Youtube gurus like @AndrewNC that make videos for free end up getting zero customers. Edit: Alright, maybe they end up getting two or three and then start calling themselves successful entrepreneurs.

    It is merely a funnel/marketing tactic for you to get sales.

    But to get sales: YOU NEED TO CREATE FUTURE VALUE.

    You need to have a product or service that is valuable enough for people to give you money. The book Ca$hvertising puts it best: For someone to give you $20, they have to believe that the $20 they're giving you is worth less than what they're getting. If they believe they're getting $30 worth of value then they'll give you money with zero hesitation.

    The only time you should be giving value for free is when you're attempting to increase the perceived value. If you know your service is worth $30, and you're selling it for $20, but no one's buying, then giving away a TASTE for free is worth it to increase the perceived value from let's say $10 to $30.

    But if you're giving value away for free, expecting the customer to eventually pay, then you're mistaken.

    I saved a former mentor of mine millions of dollars by optimizing his supply chain. I fell into the trap of giving value away for free, assuming that eventually he would reciprocate. You know what I ended up getting? Not sh*t - because there was zero reason to give me a dollar other than "loyalty".

    I have friends that have invested years into the wrong pursuits. I've read countless posts on this forum of people betting their business around these tactics and then wondering why they failed. Time and time again I've seen this model fail.

    End of the day, it's a marketing tactic. It is not the only way to operate your business, and more often than not, it does more detriment than good.

    You're a freelancer?

    What's better? You writing a thousand forum posts here and on Quora? Or you creating a strong landing page and cold emailing a thousand potential clients with a few clicks?

    I don't know what's better. That's for you to test and decide. But if you bet you whole business on just one tactic instead of trying multiple until you get traction, then you're an idiot and deserve to fail.

    To summarize: Create a valuable product or service. Employ a multitude of tactics to get traction. More likely than not, giving value away for free is bad for your business.
     
    Last edited: Oct 27, 2018
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  2. AgainstAllOdds
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    AgainstAllOdds Legendary Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR

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    @Andy Black - I'd love to hear what you think. Maybe my thought process is wrong.
     
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  3. PureDirect
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    PureDirect Contributor Read Millionaire Fastlane I've Read UNSCRIPTED

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    I've wondered about this as well in the past.

    I help people with a variety of knee issues get better and many of those that unsubscribe from my email list give "Knee is better thanks to you" or something similar as reason for unsubscribing. It makes me happy, but it doesn't pay the bills.

    So the question is: where do you draw the line between what you give away for free (because you genuinely want to help people regardless of whether they buy or not, which is where I currently stand and how I've been taught) and what you charge for if there is a finite quantity of advice you can give, regardless of how nice "abundance mentality" sounds on paper.
     
  4. Ayanle Farah
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    Ayanle Farah Bronze Contributor Speedway Pass

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    The way I understood is was only giving value for free the first few times in order to build a portfolio/reputation and then charging after that point.
     
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  5. MMatt
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    MMatt Bronze Contributor Read Millionaire Fastlane FASTLANE INSIDER Speedway Pass

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    I can attest that trying to monetize my YouTube channel with 75k subs is like pulling teeth. People want the free content and that's about it.
     
  6. RazorCut
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    RazorCut Gold Contributor Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    Yes, an important issue of the free scenario is who are you trying to attract. The type of people who descend on your free offerings might not represent the avatar you want as customers.

    So then all you are doing is attracting a plague of locusts that will strip you bare then move on once there is nothing free left. Exactly related to your cookie analogy @AgainstAllOdds

    I think freeloaders is a derogatory term but rightly or wrongly it fits the bill. It might be the case that the people taking your free offerings can't afford your paid products/services but wouldn't you be better off investing the time/money attracting the customers who are a fit for your avatar?

    The one area where I think free does have a worthwhile use is in information and creating authority. If you can build a broad community of loyal followers you will always have a percentage who are willing to pay for more depth, more detail, more information. Take sites like this for example, many of us are more than happy to support MJ's community by paying a yearly subscription and benefiting from ring-fenced areas of the site.

    Also sites like Smart Passive Income have been very successful largely because of the shear volume of valuable information that is freely available. Obviously it depends on how you are able to monetise your business. Physical products have a finite cost so if you are not careful you can get yourself into really hot water with discounted/free offers.

    Talking of which (and related to Groupon and bakeries) it reminded me of this:

    Groupon demand almost finishes cupcake-maker
     
    Last edited: Oct 27, 2018
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  7. ApparentHorizon
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    The first sale for my first real business came out with a hefty check and returned 4.9x on the owner's investment.

    The way I see the "free" movement is as Ayanle described, plus a chance to optimize your product.

    It's no harm putting together a widget for free if you're still trying to figure out what's best for your customers.

    At least to get to the 80% mark of completion. Then you can start charging.

    Both work. My second biz is built on giving the product away for free. Now I have a huge network of referrals to the point where I haven't had to make "a sale" in the past 2 years.

    On the other hand, giving away free samples in the hopes someone pays you is nonesense.

    That's like the nice guy version of business. Doing chores for a girl in the hopes she sleeps with you.
     
  8. Bhanu
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    Bhanu Bronze Contributor Read Millionaire Fastlane I've Read UNSCRIPTED Speedway Pass

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    There is good book which gives insight on this topic. Give and Take by Adam Grant . As per the book we should give 100 hrs worth of effort yearly for free . (100 hr rule of volunteering/giving). This is the optimal level of giving for long lasting success and peace of mind . I personally agree with this rule and trying to inculcate it into my fastlane efforts.
     
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  9. KLaw
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    KLaw Silver Contributor Speedway Pass

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    I never looked at giving stuff away for free as a business model. It's just a tool in your toolbox. You do it to prove you can add value and to validate your product / services. In your bakery scenario...you don't give free cookies away everyday outside your store. You give 1 free cookie away inside your store. Potential customer comes in, smells the awesome aroma as they eat the free cookie and buys more. I know I would. Or you are launching a new flavor and you want to gage (collect data) the number of folks that like it. Use that feedback to determine the value of that flavor. Again, not a biz model...just a tool.
     
  10. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Admin Post
    I'm going to disagree here, but only because the disagreement is dependent on the ultimate value being sold.

    If your cookies aren't that good, they're only good FREE, but not worth paying for.

    Something worth incredible value that is given away FREE will always be paid for.

    If the cookies were awesome FREE, I will pay for them later.

    In a more recent example, and real, I recently took a free trial on a financial simulator and backtester. I used it for nearly a month and found it incredibly useful and valuable. I ended up converting the FREE trial into a paid one.

    Why?

    Because the fundamental product had incredible value.

    It was only FREE because the entrepreneur wanted me to see it for myself, and risk free.

    When your product is of marginal value, then I would agree with the @AgainstAllOdds post.

    But when you're offering real value, the FREEMIUM model is incredibly powerful.

    In fact, I used it to build my company many moons ago.

    So the real question is...

    Is your product of marginal value, so much so that its only true value is FREE?

    Or is it of great value, so much so that people can't live without it?

    The two statements highlight the difference between a PRODUCTOCRACY and a marketing company. The OP statement seems to fit in with a marketing company, not a productocracy.
     
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  11. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    Yes, because the product being offered is bullshit more often than not.
     
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  12. KLaw
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    KLaw Silver Contributor Speedway Pass

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    "In fact, I used it to build my company many moons ago."
    Care to go into more detail?
     
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  13. MJ DeMarco
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    MJ DeMarco Raving Lunatic Staff Member Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass LEGENDARY CONTRIBUTOR Summit Attendee

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    My paying advertisers joined for FREE. They only paid when they received opportunities. Once they started getting hit with job opportunities and booking them, they paid. They came from a world of "Pay $500 now, and pray later." I got rid of that proposition back when it was virtually unheard of.
     
  14. eliquid
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    There is a lot going on in this post with @AgainstAllOdds that can be broken down.

    Things that can be expanded on, things that can be broken down, etc.

    I see both @MJ DeMarco and @AgainstAllOdds being right, but it's how you frame the light hitting it and under what circumstances that makes either one right.

    Depending on where the entrepreneur is on their journey, makes all the difference in this topic.

    I'm going to throw my 2 cents in later once I can break it down.

    .
     
    Last edited: Oct 27, 2018
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  15. jasoncuellar123
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    Any link to that financial simulator? :clench:
     
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  16. jasoncuellar123
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    jasoncuellar123 I’m probably awake. Read Millionaire Fastlane I've Read UNSCRIPTED FASTLANE INSIDER Speedway Pass

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    A couple of cookies won’t hurt the business.

    I think this concept is big in the guru world where people are just starting out.

    But a business can’t sustain itself on free.
     
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  17. KLaw
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    You talking about your limo biz?
     
  18. G-Man
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    This.
     
  19. ZF Lee
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    What do you mean? This post is soooooo late.:playful:
    Great thread.

    I think it boils down to whether you can fund 'giving free stuff' and how much working capital you can 'lose' before you start killing yourself. Numbers.

    Giving food samples, such as chips, is fine. You can buy small quantities of the food, break them up into smaller bits to have them go around for more folks. But for tangible tools, such as the Paintbrush Cover, its a bigger pain to hook people in by giving it free.

    But I think a price reduction strategy would work better. At least you get a little money, and you still potentially rope in folks looking for a deal.

    I was reading a funny tale from The Automatic Customer by John Warillow the other day.

    When the Internet popped up, folks started beating on media companies like the NYT to give them free info. No more paywall! After all, we have the right to free info! The dawn of a new era!

    Bloggers left and right became free news sources, so folks started going to them, leaving established news outlets in the dust. Or did they?

    Pretty soon, everyone started finding that free info was crap info. Horrible writing and misleading facts. We see that sometimes on social media today. Paid info and news actually ensured that reporters and editors could be paid, data can be verified and more quality interviews can be arranged.

    So yes, you get what you pay for. Pay $0, and get 0 value (or negative, in some cases)
     
  20. eliquid
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    I was going to break this down, paragraph by paragraph and decided not to.

    I found what seems like some resentment or anger in your post so I didn't want to share anything that might stir the pot for you.

    However, just always know that no matter the tactic, example, or scenario.. there will always be someone that will defy the rules and norms and take advantage of you and that is outside standard protocol for any setup.

    .
     
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  21. KLaw
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    Here is where im coming from...im a small biz owner. Come at me with "I'll build you a website, seo, blah, blah, blah"
    I'll need 5 grand upfront. f*ck you. f*ck off. vs.
    Build the website for free. Let me see the results of that. Guess what? I'm a loyal customer to you for life.
     
  22. ZF Lee
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    Here's what I spotted on homework/course material sharing websites.

    I am using Studocu to find exercises and quizzes from past university courses.

    You can upload your study materials, notes and quizzes on the site to get a few days' worth of access to its range of papers.

    But for the monetization, there's a range of PREMIUM documents which you have to pay for it. You can't download docs to get those.

    For the former, there is a system algo that scans the document and ensures that it has sufficient text to be a decent readable document. But freeloaders tend to just copy paste sh*t, post and gain access to the study site. Students who want better quality study materials will be driven to consider PAYING for the free stuff.

    And OP, this Forum actually relies on a partial freemium strategy. We have a free forum and a paid Insiders.

    But like I said earlier, the financial numbers have to match. If the 'free side' is killing revenue to the point regular operations, keeping the lights on, suffer, then it could be a no-go.
     
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  23. Chris25
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    You don't give away value for free. You sell value. But the first taste is FREE.

    Now I know this to work in multiple areas in life :clench:
     
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  24. MJ DeMarco
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    Ha, such a simplistic statement is so true.

    If you need no better real world example of a powerful value proposition and a productocracy, the freemium business model is what drug dealers use.

    The product is so powerful, they know the more free trials they give away, the more customers they get.
     
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  25. Andy Black
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    Great thread. I'll reply next week with my own personal experience doing a lot for free.
     
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