Free in 6 business models

Since the beginning of the containment, 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 it has been tried, the satisfied customer will take it to heart. Under these circumstances, our email boxes are always full of suggestions that affect all areas of our daily lives and our teleworking. As our habits change, we are bound to know how to deal with ourselves, but also how to deal with the children.

Like other sales systems, free also has its own business models. Focus on six ways to sell a product 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 in which access to goods or services is partly free, partly paid. This is very common in the online press and web service sector. Its principle? To offer the general user a free service where he can perform basic operations. If he wants to have access to richer functionalities, the consumer has to pay. Mediapart is a good illustration of this model in the online press. Non-subscriber readers have access to a limited number of articles, while subscribers enjoy an interactive interface with enriched journalistic content (videos, photos, archives, etc.). On the web service page, we can mention the example of data storage clouds like Google Drive or Dropbox. Generally, to use these services, the internet user has free access to a certain amount of storage space. But if he wants 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 are remunerated through advertising revenue. The fixed costs of operating, developing, storing or relating to human resources are wholly or partly covered by the money paid by advertisers. In return, the latter can display advertising 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 evolved over time in digital media, but not only. Web services, such as the famous search engine Google, now a unit of the parent company Alphabet, are financed exclusively on this model. The latter even optimized it thanks to its targeted ad system. Result: tens of tens of billions of dollars in revenue each year, allowing the company to cover its operating costs and invest in its research and development departments.

Cross-subsidization and everyday consumer goods.

Providing a service or item in exchange for the purchase of another product can thus summarize the model of cross-subsidization. In other words, the donation is conditional on the purchase. This model is very common in the trade of daily consumer products. When a telephone operator offers you a subscription by offering the telephone, it is a cross-subsidization. Although the phone has a certain price, it is not this purchase that will be profitable for the company, but rather the monthly payments paid over the subscription contract. Ultimately, the user of the product or service “subsidizes” the product offered to him.

Zero marginal cost, joker of the cultural industry.

In this model, the product or service is sold at a very low price with the prospect of a long-term return on investment. Less widespread than the other methods, zero-margin practices have been regularly used in the cultural and digital sector. In 2007, the American singer and songwriter Prince offered his album Planet Earth in collaboration 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, when buying derivative products and concert tickets that it was effective. That same year, the English group Radiohead launched their album In Rainbows from their website, leaving it up to internet users to set the price themselves, even at $ 0! The result was that the average price of the disc was set at six dollars, and it was the most profitable album in the group’s history. In addition, the positive sum of this operation boosted the sales of the material disc and the purchase of concert tickets. The free distribution of the intangible good, here a song, serves as a campaign for the sale of the material good.

The donation in the heart of open source.

As the name suggests, the donation model consists of offering the product or service free of charge to the user. In return, the latter is free to make donations to the supplier within his means. He has no obligation. Revenue is conditioned by consumer generosity. The leading example that illustrates this practice is Wikipedia’s digital encyclopedia. This gives its database completely free of charge and allows regular users to make a donation to the Wikimedia Foundation. These fund the cost of maintaining and hosting the site.

Exchange of work at the pace of the sharing economy.

Here, the currency is no longer money, but the mutual services provided by two actors. Unusually until now, this model has begun to find its way into what is now called the “sharing economy”. The so-called “local exchange” (SEL) systems are very illustrative. A member of a SEL can, for example, offer his competencies as a “bricklayer” to another member, who in turn takes care of developing his website. Each service received corresponds to a number of virtual credits that are accumulated by providing services. These credits can then be used 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 labor.

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