Freemium: Honesty marketing is the best pillow at night

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Reylito A.H. Elbo

Reylito A.H. Elbo

A MECHANIC was busy removing the cylinder head from the engine of a BMW when he spotted a well-known heart surgeon inside the repair shop. The mechanic shouted across the garage:

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“Hey, Doc! Could I ask you a question?”

The amiable surgeon walked over to the mechanic smiling. The mechanic straightened up, wiped his hands on a piece of rag and asked: “Doc, take a look at this engine. I open its heart, take valves out, fix them up, put them back in, and when I finish, it works just like new. So how come I get such a small salary and you get tons of money when you and I are doing basically the same thing?”

The surgeon paused, smiled again, and leaned over. He whispered: “Try doing the repair once again with the engine running.”

That’s how we compare things without considering other factors. Some people are just like that mechanic, who is unmindful that doctors do a lot of other things to understand the emotional and physical state of a patient.

Mechanics can’t simply aspire to do the same thing with an inanimate object like a BMW. Even doctors can’t simply solve a medical problem if they don’t understand deeply the problem they’re solving. The same thing can happen when we deal with people, much more if they’re our customers.

Masaaki Imai, my former boss at Kaizen Institute, documents several excellent stories on the importance of going to the gemba (or the actual place where it is happening) in his book “Gemba Kaizen” (2012). Imai talks about how he suffered while waiting for the airline to process his ticket and how he was annoyed with some hotel staff who lost an important faxed document for him.

That’s because their management failed to do the gemba walk. That’s why it’s important for us to observe people in their natural habitat in order to have a powerful understanding of the real issue. This brings us now to our buzzword for today—“freemium.”

According to Brant Cooper and Patrick Vlaskovits in their book “The Lean Entrepreneur” (2013), freemium is “a term used to describe a product offered in a ‘free’ version, as well as in one or more premium account versions requiring payments.” When people opt to get the free version of something, do they get real value out of it?

The answer is in the negative. Take a tour of many free program offerings like an anti-virus software, plagiarism checker, porn sites, etc. and you’ll see a lot of differences between the free and prepaid versions. Really, there’s no such thing as a free lunch, coffee, or whatever. Imagine the imaginable.

If a pharmaceutical company offers to sponsor a physician to attend an international conference abroad, where do you think the money would come from? If a real estate developer builds a condominium building, would it offer to give free units to city hall officials in exchange for the issuance of permits, no matter how they violate zoning and other legislations? Even the media has its own share of accusations and perceptions.

Thinking about freemium, why do manufacturers and service providers give away free versions of their products? In the June 24, 2013 Time magazine article on “5 Ways Companies Win by Giving Free Stuff,” author Martha White says free products tend to seduce customers to buy more in the long term.

She claims that “the rise of social media has more companies concerned with ‘word of mouth’ marketing and reputation. Getting your customers to say nice things about you is, according to some research, as effective as traditional advertising, and it’s almost always cheaper.”

Now, what if I offer free management seminars to people and organizations? But no, I don’t think it will work. Instead, I’ve a better idea. What if I offer a management program and allow prospective clients to pay whatever amount they like in appreciation or misappreciation of the seminar?

Can it work similar to what we‘ve done with our small-scale honesty bookstore during our public seminars? People pay whatever amount they think is reasonable in exchange for a copy of training manuals that we used in our past popular seminars. The honesty bookstore is usually unmanned.

You know the result? We’ve done 5S good housekeeping to the max and monetized old training manuals in the process. Surely, we’ll do it again in another format.

Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback to elbonomics@gmail.com or follow him on Facebook, LinkedIn, or Twitter for his random thoughts.

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