Love your freeloaders and superfans
Free does not mean unprofitable
There’s a upmarket mens outfitters in Bath that I occasionally go to. While paying for a scarf, the owner shared the following story. It was a cold, wet and windy Tuesday in February. By 4 o’clock little had been sold and the assistant had gone home. Just as the owner was about to close for the day, a tall, scruffy man, wearing tatty jeans and a t-shirt, walked in. A time waster or worse, the owner thought. The bedraggled visitor expressed interest in trying on a suit. Having to go to the rear stockroom for a suit large enough, the owner first locked the front door. The visitor tried quite a few suits on. Then, much to the owner’s surprise, said he would take five. The visitor paid for the garments and asked for them to be delivered. A name and address was provided. The following morning, the assistant read the delivery details and asked the owner if he knew who the visitor was. He did not. The assistant told him that it was Robert Plant, lead singer of Led Zeppelin, one of the world’s biggest rock bands.
Offer a range of price points
People value products at different amounts. - Nicholas Lovell
It is not always obvious how much someone is able and willing to spend on a product. For the right offer, a select group of consumers, superfans, will pay a considerable amount. Over time, an increasing proportion of products and services are digital; bits rather than atoms based. In a world of digital abundance, where the marginal cost of distributing one more copy of a digital product is almost zero, traditional business models are ineffective. There is more free digital content available than we could possibly consume, much of it of good quality, e.g. music, ebooks and games. In this world, content creators need to earn the right to get paid.
In his book, The Curve, Nicholas Lovell describes a solution. He suggests focusing on building customer relationships, and offering a range of products at different price points. This recognises that consumers have diverse needs and preferences. There are three stages to The Curve engagement model:
Find: The first stage is about reaching out to potential customers, often offering free content or services to attract attention and build a user base. The idea is to cast a wide net. A large audience can include potential customers at various levels of engagement and willingness to spend. There will be many freeloaders and they play an important roll as product advocates.
Earn: As an audience is established, the challenge is to earn from them. This doesn't mean making every user pay but rather offering a range of options that allow users to choose how they want to support the business. This could include a variety of products or services at different price points, from free to premium.
Keep: The final stage focuses on keeping the customers engaged and maintaining a long-term relationship. This involves providing ongoing value so customers feel their investment, whether time or money, is worthwhile.
Implications of the curve
Free is not a magic bullet. Giving away what you do will not make you rich by itself. You have to think creatively about how to convert the reputation and attention you can get from free into cash. - Chris Anderson
For creators, The Curve represents a shift from a one-size-fits-all approach to a more nuanced business model. Creators can offer part of their work for free to build an audience then meet the varying needs of different segments.
For consumers, The Curve offers more choice and autonomy. They can access a range of products or services for free or choose to pay for premium offerings.
The Curve particularly resonates with digital content and gaming industries. This blog is published on the Substack platform. This enables writers to share their content for free while providing options for fans to make financial donations. Candy Crush is a free-to-play game which makes over a billion dollars per year. So free does not mean unprofitable.
Other resources
The Curve Talk by Nicholas Lovell
Four Step Product Ladder post by Phil Martin
How to Join the New Rich post by Phil Martin
I enjoy wearing my scarf. It’s nice to be able to tell people that Robert Plant and I share the same tailor.
Have fun.
Phil…
