Free in 6 business models

Since the start of confinement, free offers have multiplied both to take e-learning courses and to offer us entertainment of all kinds. The idea is based on the principle that once tried, the satisfied customer will adopt it. In these circumstances, our e-mail boxes are always full of proposals that affect all areas of our daily life and our teleworking life. As our habits change, we are obliged to know how to occupy ourselves but also how to occupy the children.

At the stage of other sales systems, the also has its own business models. Focus on six ways to sell a good or service using free.

The “Freemium” model, very present in digital.

Contraction of the English words “free” [gratuit] and “premium” [payant], the term “Freemium” refers to an economic model where access to goods or services is partly free, partly paid. This is widely used in the online press and web services sectors. Its principle? To offer the general public user a free service where he can carry out basic operations. If he wishes to have access to richer functionalities, the consumer will have to pay. Mediapart is a good illustration of this model within the online press. Non-subscribed readers have access to a limited number of articles, while subscribers benefit from an interactive interface with enriched journalistic content (videos, photos, archives, etc.). On the web services side, we can cite the example of data storage clouds such as Google drive or Dropbox. Generally, to use these services, the Internet user has free access to a certain volume of storage. But if he wishes to increase it, or even have unlimited access to it, the service will be billed to him.

The classic advertising model.

In this model, the consumer has free access to 100% of the goods and services offered by the company, which is remunerated through advertising revenue. The fixed costs of operation, development, storage or related to human resources are fully or partially covered by the money paid by advertisers. In exchange, the latter can display promotional content on the company’s public media. Very classic, this model has long been used by traditional media such as television, radio and the press. This has gone through time to develop in digital media but not only. Web services, such as the famous search engine Google, now an entity of the parent company Alphabet, are entirely financed on this model. The latter even optimized it thanks to its targeted ad system. Result: tens of billions of dollars in revenue each year allowing the firm to cover its operating costs and invest in its research and development divisions.

Cross-subsidies and everyday consumer goods.

Giving a service or a good in exchange for the purchase of another product, thus one could summarize the model of cross subsidies. In other words, the donation is conditional on the purchase. This model is widely used in the trade of everyday consumer products. When a telephone operator offers you a subscription by offering the telephone, it is a question of cross-subsidies. Even if the phone has a certain price, it is not this purchase that will be laudable for the company but rather the monthly payments paid over the subscription contract. Ultimately, the user of the good or service “subsidizes” the product offered to him.

Zero marginal cost, joker of the cultural industry.

In this model, the good or service is sold at a very low price with the prospect of a longer-term return on investment. Less used than the other methods, the practice of zero marginal cost has been regularly used in the cultural and digital sector. In 2007, the American singer and songwriter Prince offered his album Planet Earth in partnership with the British weekly newspaper Mail on Sunday. Three million copies of this newspaper were sold but it is not on these sales that the profit was made. It was of course on the purchase of derivative products and concert venues that it was effective. The same year, the English group Radiohead launched its album In Rainbows since its website made it up to the Internet user to set the price himself, even at 0 dollar! As a result, the average price for the record was six dollars and it was the most commendable album in the band’s history. Besides that, the positive buzz of this operation boosted the sales of the material disc and the purchase of the concert venues. The free distribution of the immaterial good, here a song, serves as a promotion for the sale of the material good.

The donation at the heart of open source.

As its name suggests, the donation model consists of offering the good or service free of charge to the user. In return, the latter is free to make donations to the supplier within the limits of his means. He has no obligation. Revenues are conditional on distribution to the consumer. The leading example illustrating this practice is the Wikipedia digital encyclopedia. This offers completely free and free access to its database and regularly offers users the opportunity to make a donation to the Wikimedia Foundation. These finance the cost of maintaining and hosting the site.

The exchange of work at the pace of the sharing economy.

Here, the currency of exchange is no longer money but the mutual services provided by two actors. Little recommended until now, this model is beginning to find its place in what is now called the “sharing economy”. The so-called “local exchange” (SEL) systems are very illustrative. A member of an SEL can, for example, offer his skills as a “mason” to another member, who in exchange will take care of developing his website. Each service received corresponds to a number of virtual credits, which are accumulated by rendering services. These credits can then be spent to receive other services, on the other hand without exchange in return. In this model, the creation of wealth is not found in the purchase of goods or services but in the exchange of work.

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