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

[Everyman]

Using your own words. More often than not, you are absolutely right.

Would you agree it comes from the fact that 80-90% of people we meet, aren't even vaguely interested in what we do, not to mention, what we want to sell to them. Unless we approach them and start talking to them. Then we may see that, still 80-90% isn't interested, but 10-20% is. But we have to go through the 80-90% to find the 10-20%...

I think it's industry specific. Somebody has mentioned before drug dealing. So low-cost, astronomically high-margin product. It was made to be 'marketed' this way. It might work better or worse in different industries, with different products.

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.

It might build trust actually. Trust is more important than anything else, I think. I don't buy things that I don't trust, don't buy things from companies I don't trust and people I don't trust. I am ready to pay high premium to anyone, who I know is trustworthy i.e. will deliver what he promised in time he promised (even the time is not that important in some cases).

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".

Somebody has already brought up the book "Give and Take". Don't want to duplicate it here. Just a couple of questions. Did you ask him for anything in return? Did you negotiate it before or even during this process? Did you give him 'something small' for free before committing to this huge deal? What was the relationship like before this deal?

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.

You are absolutely right. It's one of the tools to use to 'sell'. Just one of many that should be used alongside others (emailing^^^, cold calling, 'social media', etc etc)... But giving away value for free isn't always bad, it's just not properly used in a specific situation.

 

[maikooo]

Great post! Thank you ...

I fell for this, totally. Worked our a$$es off for a year providing as much value as possible in terms of valuable content on various networks. The plan was clear, modeled after favorite podcasters I followed in the past.

1. build the community by providing as much valuable content as possible before charging
2. charge sponsors for the access to our audience and charge the audience for added-value products/services

The biggest risk was only related to the fact that our audience doesn't have much disposable revenue. The industry is prone to it.

Completely dismissed the need for actually validating the need (pun intended). Completely disregarded the fact that our "potential" competitors have this type of content only as part of their outreach strategy. Basically threw my Lean Startup Build-Measure-Learn training out of the window and went head in.

My partner mentioned that we shouldn't focus our business model around this, but I was too swept away by the success of star podcasters getting 10'000 downloads per episode. WTF, they are charging $500/episode, 3 sponsors each, 7 days a week. WTF*2, that's almost $50k/month. Patience and persistence will get us there ... well, after 10 months we barely had <1'000 downloads/views per episode on pod & YT. Ain't nobody pay high CPMs on that one.

Anybody who has tried a content type of business knows that sponsors may try with you out of respect/curiosity and a good pitch but they will only renew if you deliver numbers. The latter was simply not there. The audience doesn't care. We just haven't skewed value towards our offering in an immensely overcrowded industry filled with free content on every corner.

Well, in the end, we made some money to pay the bills, combining all kind of income streams, however, haven't created a system. We failed all the commandments at once.

The lesson is simple; create as much free content as you have resources for and makes sense from ROI, but only as part of your marketing strategy, supporting sales of your offering that addresses tangible pains - either by attracting new customers (SEO, trial) or increasing the perceived value of your offering

The new framework is clear; create product(s)/service(s) that address real pains, provide immediate value exchange ($) and have inherent scalability in them. Content & Community are layered on top of it, not at the core of it.

Hope this helps!

 

[McFirewavesJr]

Every time Wikipedia begs me for money, I think about this. I can't help but think: "Not my fault if you built something cool no one wants to pay for."

It also feels that many tech companies that survive on investors money preach that modus operendi since they get massively successful despite the math not working. At least in a conventional manner.

Sent from my SM-G925W8 using Tapatalk

 

[James Klymus]

While I do agree that for some businesses, Giving free first would be silly (Like the cookie example you used). But business doesn't happen in a vacuum, and it isnt a black and white thing.

For some businesses it can work really well. Especially when it comes to info marketing and even consulting. For example, when I first started working out a few years ago, A few people I knew talked about Greg from Kinobody having really good programs. So I checked out his youtube channel for a few weeks and saw that he had some awesome content and knew what he was talking about.

He even sampled some of his workout routines on his channel. I ended up buying his "greek god" program and he has a happy customer, because he let me "see behind the curtain" of his courses and I wanted more. And I know greg does very well with his company Kinobody.

I mean even MJ samples his books. He lets you download some chapters for free, and you'll probably buy the whole thing.

It isn't a black and white answer, and of course a bakery giving away all of it's cookies for free is not smart. I even think that particular example is silly. But in some businesses, Sampling the product can lead to sales, like it did in my example.

 

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[McFirewavesJr]

Wikipedia raises about $50M per year in donations. Don't assume that everyone feels the way you do.

Let me rephrase: I don't want to pay for it. On the other hand, I gladly donate to blogs and creators I like. Maybe it's just their begging tone that annoys TF out of me.

 

[KLaw]

"In fact, I used it to build my company many moons ago."
Care to go into more detail?

 

[KLaw]

Scenario 2) I'd like A-list celebrities to tweet, IG my product. But celebs get inundated with free samples and requests all the time. So I try to find if any support non-profits, and find say 10 that do. I help these non-profits any way possible. I try to become an official sponsor of them. Not expecting anything in return, but at least giving myself a .1% chance of a celeb noticing me. If they decide to tweet etc... it will be their decision to help, not my asking.

@biophase Gonna have to call you out on your #2 scenario.
You absolutely hope (expect) something in return. Why are you targeting their nonprofits otherwise? Nothing wrong with that. But, you wouldn't pick those specific nonprofits if you weren't hoping to catch their eye and get some of their ig attention. Call a spade a spade.

 

[BlindSide]

Like nearly everything in life, it depends on the situation. Sure, for some businesses it might not be the best option, but I feel that the free value in the beginning is a wise decision.

 

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[fortu1992]

I've found this interesting article:

"Take it Home and See What you Think": The Puppy Dog Closing Technique

 

[jpmartin]

they have a product problem.

In regards to Newton... was it a product problem or a pricing problem. I presume that if they followed Bear Notes subscription pricing model of say, $14 per year... *maybe* they'd see 10x the numbers subscribe...

 

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[Solais]

I think it has less to do with social reciprocity (give away something for free -> people become "indebted" to you) and more to do with trying to sell a product in an extremely saturated/competitive market.

Let's not kid ourselves - 80%+ of guys age 18 - 34 want to sit at home and play video games/shitpost online and collect "passive income."

I see the same effect among real estate agents; the ones who do extraordinarily well give away lots of free information/knowledge to potential clients BECAUSE it is the one convincing factor aside from "word of mouth."

Seems to be happening in software as well, with all the "free trials." Back when the software industry didn't turn everything into an awful "subscription," you simply read an online review, bought a CD from a store like Circuit City (ah, the good ol' 90's) and that was it. Wish that came back TBH.

 

[ChrisV]

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.

Also, with the original post, I feel like maybe there’s a specific situation he’s referring to. Like a freebie situation gone awry, and maybe in that specific situation giving away value wasn’t the best idea, but in holding a microscope to that micro problem gave it a macro appearance.

I think you also have to be smart with what you give away for free, and it’s really context dependent. And I also think your intentions matter. Like @Andy Black says “Just help people.”

If you’re not really trying to help them, or if you have some angle or ’trick up your sleeve’ people generally sense it. And now reciprocity doesn’t work because what you’re giving them no longer represents something of value. It represents to them a token of manipulation. Reciprocity only works when they feel like you’ve actually given them something of value. Like back in the day in NYC what panhandlers would do was run up to your car and just start washing your windshield. Then out of obligation people would gave them $5 or whatever, and some people would just tell them to f-off even after. they did it. They made it illegal because it was such blatant manipulation.

But that actually brings up a perfect illustration of reciprocity. There are tons of street performers in NYC who just stand there and do performances and get legitimate reciprocal payments. Like Elmo or the bleeping robot in Time Square:



They have a cup next to them. You’re not required to put money in it. But some of these guys make six figures I’ve heard. No one is required to give any money. People just feel like they’ve been given value, so they give them money. There is no requirement. A few of my favorite public speakers have turned to this model. Author Sam Harris, Dr Jordan Peterson, Joe Rogan, and they're making millions. By putting out free content. Do I suggest this model? Maybe not. But it illustrates a point.

But for your standard business, the bottom line is you have to make people really want what you’re selling. You have to make them believe believe they’re on fire and you have the water.

There are a number of ways this can happen in practice:

• Their friends tell them ‘holy crap, you really gotta try X!’
• They’re a repeat customer who has already purchased from you
• They try a sample and really like it.

They have to believe that they’re not going to hand you a $20 bill (or $100, or wire $1000) and gonna leave feeling ripped off. They don’t want to feel like a sucker. So trust is huge.

But that being said, I think the. OP makes a valid point. You gotta know when to pump the brakes. I mean you’re not running a charity.

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.

I agree but I would say take it a step further and make them believe they’re paying $10 for $100 worth the value. And even better better... actually do it. I aim to give my clients $1,000 worth the value for every $100 they spend. When you do that, they become repeat loyal customers and tell all their friends.

But on a customer side reciprocity is strong. When I go to Costco and they have all those free samples, I always say to myself "I’m not gonna buy anything I’m not gonna buy anything I’m not gonna buy anything.. I’m just gonna try it”.. and then i try it and then i feel like a grub for taking free shit and end up buying one lol.

People are a lot more generous than the self-interest model would predict.

 

[Nigel B]

Yes marginal value premium creates marginal loyalty for sure.

 

[banjoa]

Ben Settle seems to agree with OP.

 

[FierceRacoon]

At one point I taught social dance (Argentine Tango) for a new studio. The studio used promotions on living social heavily and attracted lots of bargain-hunters. On the surface it was successful, as the owner was able to keep renting three huge studios at a prime location in New York City. However, the model was not sustainable as he had to keep offering promotions.

We would sell 30 passes for a series of classes, and maybe 1 person would stay long-term; more often than not, nobody would. Instead we'd see those people who didn't care about learning as much as they cared about bargains. They would take Salsa-1 at one studio, Salsa-2 at another studio, and if there was no deal for Salsa-3, they would take Swing-1 or whatever else was on sale.

At some point we wanted to do a student performance group that would rehearse once a week. We wanted them to pay about $40/month... and that was a deal-breaker! I believe that not a single one of the ten or so interested people was prepared to pay. The going rate for regular classes was like $14; our charge was completely symbolic, yet those people weren't prepared to pay. They wanted to pay $100 for a year of unlimited classes and then they would come and really take whatever there was, indiscriminately, without much regard for learning.

In the end the whole thing collapsed. The owner made other mistakes, but that was a part of the problem: we had effectively selected a very cheap group of people that was immune to any attempts at upselling. It was not just that we were giving value away; we were attracting the wrong kind of people who absorbed the value much like people take free cookies. It did work in the sense of filling the studio with people, but dance studios don't survive on this kind of clientele; we had to transition not to charging those people more money, which was impossible, but to attracting a different kind of people.

 

[KLaw]

You talking about your limo biz?

 

[G-Man]

under what circumstances that makes either one right.

This.

 

[KLaw]

Since you don't know the business I'm in, I understand your reply. However, the answer is yes, I would and have picked them any way. In fact, the ones I mention in scenario 2 consist of 5 out of the 2000 nonprofits that I've donated over $1.5 million worth to this year.

There's a reason I get offers from owners of non-profits. It's not because I send in one donation, but I consistently send in donations every week.

Not true. You stated in your reply that you targeted those folks in hopes of obtaining some likes (returns). Like I said, it's cool.

 

[KLaw]

There's a used car lot in my area that gives away a free $5000-ish car every 2 weeks. His facebook posts get 4,000 or so likes every time, and 100+ shares.

I know him, and he sells more cars than he can keep up with. Has put at least half of the other used car lots out of business. He's very niched (sub $6,000 cars and cash only), and plays big on the "free bucket of chicken" mentality.

To enter the contest all you have to do is fill out a form with your name, telephone, and the criteria of what kind of car you are looking for, plus friend him on Facebook. Then magically, when you don't win, he finds a car that fits your criteria and calls you...

Brilliant!

 

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[Josh Schmitt]

Agreed. BUT it's not a black & white rule. Situational awareness. In those cases, you're definitely right & it's dumb to not get paid.

What about advertising though, if you can add value in the title of a video, or first 15 seconds.. then people will listen/click.

I feel like the general point that most guru advise is generalized truths. The REAL SHIT is nuanced & more complicated

 

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[ChrisR]

Another good example of this is Sees Candy. No one who walks in there for a free sample leaves without purchased goods.

 

[SEBASTlAN]

So let's say you're doing courses - would you give away the first module and make them pay for the rest of the course? OR make one course entirely free then make a paid one and hope they buy that one?

 

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[SEBASTlAN]

For our service business, it's awful.

Same here.

SaaS seems to be a good business model with the freemium/trial method - first month free for service though is hard to recoup if a good majority don't convert.

 

[100ToOne]

I run a local convenience store and to be honest your chances of selling me your product increases by 150% if you give me free sample to me and our employees...not because we're cheap but because now we know that it tastes good and others will buy it over and over again.

So I guess the scenario with giving value first is always better, obviously if you have a strong product to begin with.

 

[jpmartin]

And the larger question, why not sell it? Surely it had to be worth something!

Thought the same... but hey, you can always ask the founder who knows he might offer it to you! And you can turn it around by getting the pricing right! Having used Spark... I dont see how Newton can charge for a multiplatform email app. But Readdle's strategy with Spark is clear... make it a free product and sell other apps. Newton is a one trick pony, with one app. Begs to ask the question... would giving away one product, to charge on another be the solution? I honestly dont know...

 

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[Nigel B]

I agree but I would say take it a step further and make them believe they’re paying $10 for $100 worth the value. And even better better... actually do it. I aim to give my clients $1,000 worth the value for every $100 they spend. When you do that, they become repeat loyal customers and tell all their friend

(I've not read Ca$hvertising - the quoted ratio may be relevant to a specific market covered by that book. If it's focus is a $20 advertising spend generates $10 profit after all other COG, overheads, etc. - but for product/service to price ratio I think the following is more realistic.)

10:1 is high, but much more likely to get a bite than 3:2 ($30 value for $20 spend).

The reason is that in order to overcome buyer hesitation they have to be sure of the value of their spend. Early in the relationship they are only working on your reputation - as well as they can figure that out - and your claims. So they need to believe they will get massive return, in order to take the risk - thereafter (assuming you prove your value the first time out) that ratio can close.

Hence the 'guru' model which walks people from a $97 course, to a $500 course, to a $2000 event and then a $10K 'inner circle' - each time narrowing the value to price ratio.

The ratio also very much depends on the product or service of course. If the product is genuine dollar bills - the ratio does not need to be anything more than 1.01:1 assuming a zero cost transaction for the buyer. Point is, certain products (more so than services) do not need to offer a 10:1 leverage - but I think the minimum perceived leverage which is likely to move people from skeptic to first-time-buyer is not usually less than 3:1 and normalling the range 5:1 - 10:1.

 

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[ChrisV]

10:1 is high, but much more likely to get a bite than 3:2 ($30 value for $20 spend).

I aim to do that. Whether that actually happens or not is debatable. But I agree. As long as you're offering $1.01 the value for $1, people will buy*. But the higher you tilt that ratio in the customer's favor, the higher the velocity they will throw their money at you. When you bump that ratio up high enough, that's where you start getting people camping overnight to get your product.

*i have to make a footnote here because there's also opportunity cost. Yes, they'll buy something worth $1.01, but if there's someone else offering something worth 1.02, they're gonna jump on that deal instead. The big lesson is to boost that ratio as high as you can without incurring losses from elsewhere. This is signifigantly easier to do with scalable businesses.

 

[Thomas Baptiste]

I have been conflicted about this topic for so long but it actually makes logical sense now. Thanks for clearing that up.

 

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[MrChill]

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.

Congratulations on working hard and hitting 75k! What product/service and how have you been trying to convert them into paying customers?

I think freebies have a valuable place in the toolkit, when used properly. Costco, a business that most customers absolutely love, give away countless freebies each year in the way of samples. They know that when people are exposed to something new and novel, and that the quality is solid (Costco's corporate buyers don't buy garbage from suppliers), people will buy! The cost of these samples or freebies is nominal to Costco relative to the number of new sales they'll make.

Likewise, Evernote and many other Freemium SaaS companies have such nominal incremental costs to add a "free" user. They know that once I put 100's of notes in their system, I'm not going to easily jump ship when I finally outgrow the free subscription. They know I'll open my wallet for the value proposition of a few bucks for month, given all the extra features and storage I get.

 

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[LittleWolfie]

Giving value and demostrating value aren’t the same thing.

Love this quote, and this thread.