The Business of Free

Today’s news included a report that Macmillan was shutting down Pronoun, the self-publishing platform it had acquired in 2016.

To quote the article by Publishing Perspectives:
‘there was at times a community-wide hesitation around the platform because it charged nothing. Authors retained their rights and 100 percent of a retailer’s net payment–no cut to Pronoun. [The Alliance of Independent Authors’ John] Doppler wrote in [an] earlier review that Pronoun’s services were free to authors because the company had $3.5 million in venture capital funding from Avalon Ventures and revenue from “its not-insubstantial legacy business.” Future revenue, he wrote, would come from “voluntary partnerships with high-performing authors. These authors may be invited to publish through Pronoun’s traditional imprints, giving up a share of royalties for enhanced services.”’

Free always scares us as a business. While customers might rejoice over the availability of free services and might even abandon your business because it does not offer services for free, in the absence of a sustainable, revenue-generating, business model, it is always going to be difficult for any business to provide valuable services for free, on a continuous basis. In the long run, that can actually be bad for customers themselves.

Offering free services is a textbook-recommended approach adopted by manufacturers and service providers in order to grab market share. The tactic hinges, though, on charging for something else in order to compensate. Like Gillette, which gives away its razors for almost nothing, but charges a premium for blades.

Customers like to hear that something is on offer for no cost; given two options, they will choose one that has freebies, or more freebies, mentioned as part of the offer. However, with there being no such thing as free lunch, someone is paying for it. In many cases, it is the customers themselves, paying a premium for one service while another is offered free. For example, customers opting to stay at a 5-star hotel are offered a free pick up and drop off to the airport. The room charges, however, have more than compensated for the “free” service.

But many times, it is the supplier paying for this free service. That is often a problem because there remains the risk of the supplier ultimately running out of money to pay for them. That can often lead to one of two things: a) the supplier having to stop offering free services or b)the supplier having to shut shop because it does not have the money required to continue operations. What happened with Pronoun was perhaps the latter.

If you are acquiring customers because of the free services you are offering, you run the risk of losing these customers when you can no longer afford to offer these services for free. The cost of these services, often put down as marketing costs, or customer acquisition costs, ultimately keep adding up till you, as a businessperson, can no longer afford to bear them. If “free” is your only USP, your business runs the risk of shutting down when the freebies stop.

It is therefore important that your business offers customers value that go beyond just offering services for free. In fact, on the flip side, you can charge customers a premium if you can convince them that the quality of your product, or services, is second to none, and that they offer value for money. That, in my opinion, is a much better proposition to offer, because it attracts only those customers that value your services, and who will probably recommend them to others.

At CinnamonTeal Publishing, we have often been compared to our competitors who offer freebies in order to attract customers. When asked to match their offers, we politely decline. We are in the self-publishing business in India for 10 years now, and know exactly the value of what we offer. WWe know that we offer best-in-class editing, design and printing services. That we have tied up with the best service providers to provide marketing and distribution. And to endorse that, we have satisfied customers from across the globe.

photo credit: pexels.com