VC in DC : The Power of "Free" can be and often is --- over estimated

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The Power of "Free" can be and often is --- over estimated

I have just finished Chris Anderson's "Free - The Future of a Radical Price" and loved it. It is insightful and educational about the past, current and future potential uses of "free" as a price point. I am a fan of open source and this approach to cost effectively acquire market and customers. That said, I've seen three areas where start up CEO's tend to over estimate the power of "Free".

1. Product Acceptance and Forgiveness

Just because its free doesn't mean it doesn't have to be great. Distributing free product will influence people to try a product but it won't influence whether they like it. Those are two separate actions. It is a grave over estimation to think that people will accept inferior quality or usability because something is free initially.

2. Marketing

If you want people to try and use your product, you're going to have to market it well. It doesn't hurt to be clever, innovative, creative and /or persistent. But the marketing burden to drive demand remains regardless of price. I've seen CEO's assume that a "free" distribution forgives or at least lessens the marketing challenge. It doesn't.

3. Support

As an example, open source software products, generally create and foster a community. That community provides improvement, iteration and support within the community around the product. But the community cannot and will not do it all. The author(s) must stay actively involved and be fully open about their contribution and planned contributions. That a community exists doesn't lessen the support mission or its priority. It also heightens the need to produce and keep producing great documentation.