The birth of the Internet has been a mixed bag for business. On one hand, it has given firms unprecedented growth opportunities, on the other, it has driven distribution costs to zero allowing some competitors to give their product away for free. The music and publishing industries are great examples of how the Internet can be a destructive force.
So how can firms survive in this new competitive landscape where content is rich and prices are elusive? Nicholas Lovell, author of the Curve, suggests that firms should stop fighting and start embracing ‘free’. The idea is simple: give some content away but allow those who love what you do spend lots of money on the thing they value.
To achieve this, firms must segment their customers according to their maximum willingness to pay and provide a range of products accordingly. Although the majority of customers will be ‘Freeloaders’ who won’t pay for content, they still provide considerable value by becoming your word of mouth. On the other end of the spectrum, you have the ‘Super Fans’ who are prepared to spend above the odds for your brand- it’s your job to provide them with the products they value.
Candy Crush Saga is a great example of how this formula can work. The game is a free downloadable app with numerous upgrades for users who just can’t get enough. Even though 70% of users have never parted with any money, the company is making $230 million annually!
We’ve been applying this idea to some of our publishing clients who have to compete in a market that’s increasingly saturated with free high quality content online. So how much is the Curve worth to you? You decide- download his content for free, buy his book or if you really want, why not enjoy lunch with Levell himself for £10 000 a pop?