Price signals are how people determine value… this is basic economics. While people are prone to complain when prices rise, it is the reflection of demand and/or scarcity. This is why it is so dangerous when the government intervenes in the economy – it distorts pricing signals. Just as important, however, is the way that prices trigger psychological reactions when purchasing.
While traveling around the country to meet with some of the world’s best internet marketers, they all told me the same thing: “You are giving WAY too much away for free.” At first, this seemed strange to me; after all, if I’m giving stuff away for free, shouldn’t that warm up prospective clients and make them more likely to purchase my stuff?
While value in theory does determine price, the opposite is often true in the mind of the buyer: price determines value. In other words, a $100 product will be perceived as more valuable than a $10 product.
Therefore, what is the value of something that is free?
In the mind of the buyer, it is worthless.
As a result, giving something away for free not only diminishes the value of something in the mind of the buyer, but it reduces the perceived value of future products that you promote.
More importantly, giving too much away for free attracts the wrong crowd for a business setting. Those who are seeking to purchase a product will often be turned away from free information because their perceived value is eliminated.
Just recently, a business partner ran an idea by me: give away a fantastic piece of software in order to build a list. It’s a great strategy, but I told him to change it. Giving something very valuable in exchange for a name and an email will attract a large list of people looking for free stuff, and they become trained to expect stuff for free.
In order for this to work, you need a bridge…
Here’s the deal: I love to give away stuff for free. I do it the most in my internet marketing promotions just because I know how much crap there is out there. However, to actually PROFIT from giving stuff away for free, you absolutely must have a call to action built into your campaign. Sometimes, this is a product recommendation. Other times, it’s an upsell to your own program. Whatever it is, your prospect needs to be hit with an offer throughout the entire process of consuming the free product.
Consider this story: I sent out an email from Tampa explaining my experience there. To close the email, I offered to answer any question via email. Over one hundred emails came in, and I answered every single one of them. Some of them I answered while sitting in an airport getting ready to board a plane. The next day, I received an email from an irate business friend, saying (paraphrase): “How dare you answer my email while in an airport. Why didn’t you wait until you had enough time to answer my email properly? You just lost a customer.”
This caught my attention for a few reasons: first, I had gone out of my way to answer this guy’s question. Second, I sent him a personal email that answered his question directly. Third, I wasn’t selling anything. Fourth, he wasn’t a customer.
This person had been trained to expect me to deliver for him. He considered himself a “customer” because he had consumed what I distributed, even though it was free material. He expected me to give him more personal attention because my free stuff had helped him in the past.
He had been trained to expect more and more.
This is not to say that you should not give away free materials. You absolutely should, as long as your follow up process is one that is profitable for you. When recruiting free prospective customers, every step must lead them closer to a purchase, and this should be clear to the prospective. If he or she is completely aware that the “full package” cannot be gained without purchase, then he or she will intrinsically have a higher perceived value of both the free materials and the paid materials.
There are a few ways to do this:
– In your free content, refer to the “full package,” or an affiliate program that is related to the content that you are promoting.
– Tie the free material into a program that has to be purchased.
– Keep an aggressive autoresponder follow-up series that promotes your product or an affiliate offer.
What are you doing that is training your customers to be less profitable for you? What are you giving that is not leading towards a sale? If you are going at lengths to do anything that cannot be monetized, it is wasted energy (unless you are building a brand). Those that are lost along the “free” path are those that will cause the majority of your problems and are no true loss.
Consider your current business process: how are you leading your prospective customers to purchase? You must lead the horse to the water and give them a chance to drink. If the horse doesn’t drink, but you give it water anyway, then the horse will expect you to give it water every time.