Free Style Marketing - The Unobserved Revolution

Free Style Marketing

How many times have you been to a business conference that guided the world to sell things for free?  Well, if you never heard about one, then you need to know about Nokia World 2007 Conference where Chris Anderson, Editor in Chief talks to the world referring to this. The campaign broke all the traditional rules of selling a service product. As per Chris, the new way to sell today has changed focus from the actual product to the complementary product or supporting product that could enhance the selling of original product.

Chris talks about the new selling concept of 0 + 2 = 2 in contrary to the old concept of 1+1 = 2. Now, what the hell did he mean by this Math..?

Consider a company A & B that sells both - the products and the services on the same products. As per the traditional earning model Company A earned Rs 1 revenue from selling the product and Rs 1 revenue from the services on the product. The modern way of selling sacrifices the revenue on product to earn revenue on service of that product which is more profitable i.e. - selling the product for free with revenue as Rs 0 and earning 2 from servicing that eventually costs very less.  

In industries like IT - The cost of service could be 100 times the cost of software (which is considered product). For Telecom operators the investment is fixed as they pay for lease licensing - the huge the number of subscribers, the larger the profits. Giving a valuable product at a very less or no margins or even free of cost lures big customer base. At the same time, developing a model to recover the revenue from value added services and perpetually introducing innovation into services may lead to extensive money mines.

One such industry that has practiced this well enough is Telecom- In May 2009, Apple announced that one billion iphone apps have been downloaded in the first nine months. A source identified that Apple is earning more than $70-160$ from iphone applications developed by open source community of around 600,000 developers that paid a membership fee of $99 (excluded revenue). Now it’s worth noting that it took 6 months to hit 500m app downloads, and only three months for the next 500m app downloads, so Apple’s revenue run rate is higher than this. Thought the revenues from software applications today have not gone pass the product revenues but the change is expected soon. It wasn't a miss calculation when Reliance sold Samsung phone sets for Rs. 500 in the year 2002.

I run a Guitar School. Given a situation where every home has a Guitar - I imagine my business growing beyond leaps and bounds. The reason why it's not growing today might be because a guitar costs good amount money. If I shake-hands with a Guitar retailer and start selling Guitars at no margins - this could lead to massive revenues in my teaching (service) business of which I'll pay a % to the retailer. Bingo..! So the vision here is straight and simple - there would be a point in the economy when all would sell your product for free or just cover expense and earn all from service that may provide many fold the profit earned through product which is one time sell.

If you go by the Cheese theory, you will analyze that the old cheese might not last longer and the market dynamics might move the cheese soon. The quicker you let go the old cheese the sooner you find the new cheese. Move with the cheese and enjoy it.

Please refer this article further if you like it and share your feedback and examples if possible.

- Nishchal Khetarpal