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The Most Misunderstood Word: Free



Kirjoittanut: Yousif Majeed - tiimistä Kaaos.

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FREE
Chris Anderson
Esseen arvioitu lukuaika on 8 minuuttia.

The Most Misunderstood Word

Here is a Thesis- template of the essay The Most Misunderstood Word Free.docx

Introduction

 

Let’s get right to the story: at the age of forty, King Gillette was a frustrated inventor who had little to show for his ideas, energy, and wealthy parents. The inspiration struck him one day as he was shaving with a straight razor that was so worn it could no longer be sharpened. What would happen if the blade were a thin metal strip? And it would be simple for men to replace them with new ones when they grow stale.

Gillette sold a total of 51 razors and 168 blades in the first year (1903), so it didn’t catch on right away. He experimented with every marketing ploy he could think of over the following ten years. He offered a steep discount to the army in the hopes that the soldiers’ habits from combat would carry over to peacetime. He provided banks with large quantities of razors so they could give them away with new deposits as part of “shave and save” campaigns. Everything came with blades, but without the razors, the blades are useless. If you still don’t understand the free marketing strategy, here are some brief examples. The most modern way to do this is to offer a free video or course and then sell the product or service. Other methods include giving away cell phones, selling monthly plans, making video game consoles cheap, and selling expensive games.

 

Free has the ability to draw attention like almost nothing else while also arousing suspicions. There are countless varieties of free, “buy one get one free” is equivalent to saying it is 50% off, and “free shipping” usually means the cost of the shipping is already included in the price. A “free sample” is merely basic marketing meant to introduce and persuade you to purchase the product. Free content is a business model that has been in use for more than a century, but there is also the world of ad-supported websites, radio stations, and TV channels. About 1.3 million people travel by plane from London to Barcelona annually. Ryanair offers tickets for just $20. The CEO of Ryanair has stated his desire to offer all seats on his flights for free in the future. Ryanair charges $70 for a flight from London to Barcelona. Here is how they recover their funds.

 

70 $ in total

20$= Ticket price

30$= Checking Two bags

1$= Advertising revenue per passenger for one-hour flight

5.5$= Subsidy from more expensive flights

6$= Credit card handling fee

4$=priority boarding

3.5$= One bottle of water

 

Finally, free can occasionally be truly free and may even represent a new model. The vast majority of online commerce uses digital economics and new-zero marginal costs. For instance, the majority of Google’s services, along with Wikipedia and Flickr, are free.

All forms of free basically amount to the same thing: moving money from one person or thing to another between now and later. These are known as “Cross-subsidies” by economists.

 

 

Cross-subsidies are the heart of the adage “there’s no such thing as a free lunch,” which suggests that, if not by you directly, then by someone else whose purpose it is to provide you with free food, the food must be paid for somehow. Cross-subsidizing products entails giving something away in order to promote the sale of another. Sometimes people contribute inadvertently. For instance, a free newspaper features advertisements that cover the expense of the paper and also help the newspaper company’s reputation by showing that people are reading it.

Free models typically fall into one of four types in the vast area of cross-subsidies:

 

  • Direct cross-subsidies

It is a loss leader when Wal-Mart offers a buy one, get one free DVD promotion. Yet, the goal of this ploy is to convince you to buy additional goods so that they can profit from your purchase. Psychology, not cost, is frequently the deciding factor in how much any individual component costs.

 

  • The three party market

The economies established around free typically have a three-party structure. Simply said, there is a free exchange between two parties, a third party jumps in for their advantage, and everyone profits. For instance, in the social media sector, everything is provided free of charge to the first party; nevertheless, the producer is paid by the third party to provide the first party with data, and party one will ultimately pay the third party.

 

  • Freemium

One of the most popular web business strategies is freemium. offering them a free option with the option to upgrade to a superior one for, say, €25 per year. It reminds me of the outdated marketing strategy of providing a sample for free in the hopes that the buyer will purchase more. In the freemium model, it is genuinely free, and a pro is offered as an alternative. But, the other one is genuinely free. Of course, both purposes are to get you to buy.

 

  • Non-monetary markets

Another type of free exists, and it is something that people offer because they feel good about it, they react positively to it, or for other reasons.

 

-The three party market

The economies established around free typically have a three-party structure. Simply said, there is a free exchange between two parties, a third party jumps in for their advantage, and everyone profits. For instance, in the social media sector, everything is provided free of charge to the first party; nevertheless, the producer is paid by the third party to provide the first party with data, and party one will ultimately pay the third party.

 

-Freemium

One of the most popular web business strategies is freemium. providing users with a free option and the option to upgrade to a superior one for, say, €25 per year. It reminds me of the outdated marketing strategy of providing a sample for free in the hopes that the buyer will purchase more. It is essentially free in the freemium model, and you have access to an optional pro. Of course, the two purposes are to get you to make a purchase, but one is genuinely free.

-Non-monetary markets
Another type of free exists and is something that people offer as a result of a positive emotion, a response, or another factor. Giving is sometimes done just for the sake of reputation; it is not always done for monetary gain.

Labor exchange: Some businesses use you as labor to make money off of your unpaid labor. One of them is Google, which offers its services without charge but makes money off your labor. You are assisting Google’s algorithms by searching, which also makes advertising simpler and more successful.

 

Nothing better exemplifies piracy than online music. Although musicians would like to profit from their album, piracy has prevented this from happening.

Nowadays, musicians leverage their free music to generate revenue from paid services like concerts, merchandise, and licensing.

 

To make things easier to understand, below are a few examples of free models. Basic cross-subsidies include government-funded small business classes, for which you ultimately pay taxes. A few ad-supported models include Instagram and 800-free 411. Examples of freemium business concepts include Kids Night on Broadway and Skype (free phone conversations). Free dogs on Craigslist and museums are examples of non-financial markets.

 

An “anchor,” as behavioral economists refer to it, is what customers use to gauge what a reasonable price is. That may have a significant impact on the final price customers pay. In this instance, the students who were asked if they would pay 10 cents were willing to pay, on average, 1 cent for the brief poetry, 2 cents for the medium poem, and 3 cents for the lengthy poem. As this was going on, the pupils who had been taught that ariely should pay them really demanded it. They requested 1.3e for the short reading, 2.70e for the medium reading, and 4.80e for the lengthy one.

 

The history of free

 

Early civilizations used a trading system as one of the earliest examples of free trade in commerce. The exchange of commodities or services of equivalent value would take place in place of the payment of money for goods and services. People could now get what they needed without having to make direct purchases thanks to this arrangement. It was a way for people to get goods and services without paying for them, even though it wasn’t truly free.

Businesses started utilizing the idea of free in more overt ways as economies developed and money became more widespread. For instance, in the 19th century, companies would provide customers with free samples of their goods in an effort to persuade them to make a purchase. Companies like Jell-O employed this tactic to entice housewives to purchase more gelatin by providing free samples of their product.

With the advent of television in the middle of the 20th century, the idea of free assumed a new shape. For the purpose of attracting viewers and promoting their products, businesses would hold free giveaways or competitions during ads. Companies like Coca-Cola adopted this tactic, giving away free Coke bottles to customers who sent in bottle caps with winning numbers.

Free has gained a whole new level of significance in business in the digital age. Free services are provided by companies like Google and Facebook in exchange for customer data collection. Some businesses encourage clients to sign up for paying memberships by providing free trials of their goods or services. Customers are expected to try the goods or service before deciding whether to pay for it.

Although the idea of free has been employed in commerce for millennia, its significance has increased in the digital era. Free trials, incentives, and other strategies are being used by businesses to entice and keep clients in a market that is becoming more and more competitive. Although it is unclear how the idea of free will change in the future, it is obvious that it will continue to be crucial to business.

 

 

The psychology of free

In the commercial world, the idea of “free” has a significant influence on consumer behavior. According to research, the concepts of perceived worth and loss aversion are central to the psychology of free. When given the chance to acquire something for free, customers frequently think it has a higher value than if it were to be paid for, generating excitement and providing a motivation to act. People are also typically loss-averse, which means that their motivation is higher to prevent losing something than to acquire something of equivalent value. Hence, a strong incentive to take advantage of a free offer can be the fear of missing out on it.

The psychology of free, nevertheless, has its limits in business as well. Free deals can draw clients and boost engagement, but it’s crucial for businesses to make sure that they complement their long-term objectives and financial success. For instance, providing a free good or service that the firm cannot support in the long run will ultimately hurt its financial position.

Businesses must also take into account the potential drawbacks of giving things away for free, such as how it can diminish the value of their goods or services or set a precedent for future freebies.

In general, organizations can benefit from the psychology of free if they employ it strategically and in accordance with their objectives.

 

 

Too Cheap to matter

The effect on company models of being “too inexpensive to matter.” The theory is that when a good or service is practically free, its perceived value declines and customers may no longer think it is worthwhile to spend their time or money on it.

Because to the near-zero cost of distributing and duplicating digital commodities, this phenomena is particularly common in the modern day. According to Anderson, this has resulted in a pricing race to the bottom, where businesses are under pressure to provide their goods and services for free or at a very cheap price in order to remain competitive.

Anderson warns that this tactic might be dangerous though. A product or service’s worth and quality may be questioned by customers if it is too inexpensive. A lack of options may also cause decision paralysis or a general lack of interest in the good or service. In the end, Anderson contends that companies must come up with innovative ideas on how to stay competitive in a world where “free” is increasingly accepted as the standard. Businesses may thrive even in a market where their goods or services are offered for free if they concentrate on creating value and developing long-lasting connections with their clients.

 

References:

Anderson, C. (2009). Free: The Future of a Radical Price. Random House.

Bagozzi, R. P., Gopinath, M., & Nyer, P. U. (1999). The Role of Emotions in Marketing. Journal of the Academy of Marketing Science, 27(2), 184–206.

Franco, E., & Hauser, J. R. (2010). The Role of Empathy in Market Research. Harvard Business Review, 88(2), 102–108.

Nunes, J. C., & Dreze, X. (2006). The Endowed Progress Effect: How Artificial Advancement Increases Effort. Journal of Consumer Research, 32(4), 442-452. https://doi.org/10.1086/497539

 

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