This was presented at the Austin Product Camp 7 - July 2011. Presentation discusses when and when not to adopt the FREE model for one's business.

1. To Be
or
C.K. Kumar
Not To Be
Manage Profitably in a world of FREE!

2. Manage Profitably in a world of FREE
Definitions of
Not Costing or Charging anything - Merriam-Webster
Anything with a hidden or obvious fee - Urban Dictionary
C.K. Kumar

3. Manage Profitably in a world of FREE
Re-Definitions of
1990
Gimmick ? Strategy?
C.K. Kumar

4. Manage Profitably in a world of FREE
Enterprise
Business
Non-Profit For-Profit
 Time
 Talent
 Technology
C.K. Kumar

5. Manage Profitably in a world of FREE
Why Does Work?
Benefits
Value =
Price
Price Shipping
$5.00 Free
$2.50 $2.50
Free $5.00
C.K. Kumar Based on Dan Ariely – Predictably Irrational

6. Manage Profitably in a world of FREE
The Economics of
$ Costs
Costs, Break-Point
Revenues Break-Even Revenues
Point Profit Zone
Fixed Max. Profits Profits
Costs
Units
Q1 Q2
Q1 ≤ Q n ≤ Q 2
C.K. Kumar

7. Manage Profitably in a world of FREE
Business Models
Product /
Software
Business Verticals
Application Retail / Consumer
/ Service Products
Content
Free Altruistic Labor Freemium Cross-Subsidies Pay
(Advertising) (Donate) Exchange (Free Trial, (Buy 1, Get (No Free Lunch!)
(Donate) Pay for Premium) something Free)
Revenue Models
Based on Chris Anderson, Author of FREE
C.K. Kumar L.Grivet, Consultant, www.Bizmo.it

8. Manage Profitably in a world of FREE
Business Model Challenges
Product /
Open Right Product / Service
Software HARD !
Source
Business Verticals
Application Social
Wild Wild
/ Service Networking
West
ADS
HARD !
Content
Open Content
Free Altruistic Labor Freemium Cross-Subsidies Pay
(Advertising) (Donate) Exchange (Free Trial, (Buy 1, Get (No Free Lunch!)
(Donate) Pay for Premium) something Free)
Revenue Models
Based on Chris Anderson, Author of FREE
C.K. Kumar L.Grivet, Consultant, www.Bizmo.it

9. Manage Profitably in a world of FREE
When does work?
“FREE” works when
 Strategic Approach
 Consumer / Retail
 Large but fragmented market
 Product or Service is useful
 Volatile consumer preferences
 Strong technology component
 Customer acquisition costs are high
 Value-chain has deep pockets
C.K. Kumar

10. Manage Profitably in a world of FREE
Can you compete with ?
Yes!
 With better customer insight
 Why are they paying?
 What are they paying for?
 Articulate your value proposition
 Ultra-segmentation
 With a “Total Solution” product
 Free vs. Freemium
 Leverage your value chain
 Build / develop adjacent competencies
C.K. Kumar Based on Chris Anderson, Author of FREE

11. Manage Profitably in a world of FREE
Can work for me?
Maybe!
Value Chain Target Market
 Industry / Product Category  Ultra-Segmentation
 Value Chain Linkages Customer  Large Enough Size
 Psyche
 Awareness & Loyalty
C.K. Kumar

12. Manage Profitably in a world of FREE
the Value-Chain
C1 P1 D1 S1
Creation Total Costs
Packaging
Distribution
Consumption
Total Costs = C1+ P1+ D1+ S1 Support
C.K. Kumar

13. Manage Profitably in a world of FREE
Funnel the
Independent Pet Stores
Total Available Rate 15,000
Market
Reach 30% 5,000
Adoption 50% 2,500
< 1%
5% 125
Conversion
Adapted from “16 Ventures” Presentation on Freemium
C.K. Kumar

14. Manage Profitably in a world of FREE
the customer
 Product / Service Category
 Consumer Psyche
 Nice-to-have Vs. Must-have
 Problem-Solution Gap
C.K. Kumar

15. Manage Profitably in a world of FREE
closing thoughts
 FREE can be a very effective marketing strategy
 FREE should be consistent with offering
 FREE has multiple business models
 FREE requires acute customer awareness
 FREE should be one of many revenue strategies
 FREE is costly !
C.K. Kumar