INSTANT MBA: Giving Your Product Away For Free Beats Lowering Prices
Today's advice comes from Eric Schmidt, ex-CEO and current chairman of Google:
"Free is a better price than cheap. And this simple principle has been lost on many a business person. There are business models that involve free with adjacent revenue sources.
And, in fact, free is a viable model with branding [advantages], [charges for] service, and other things. But it's a different business model from what most of us are used to.
A rule of economics is that for manufacturing and mature businesses, eventually the price of the good goes to the marginal cost of its production and distribution. Well, in the digital world, for digital goods, the marginal cost of distribution and manufacture is effectively zero or near zero. So, certainly, for that category of goods, it's reasonable to expect that the free model with ancillary branding and revenue opportunities is probably a very good thing."
Eric Schmidt,
ex-CEO and current Chairman of Google
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