Rethinking Free Product Strategy in the Age of Pandemic
By: Joe Procopio
Tags: Entrepreneurship, Leadership, Product Management, Business, Startup

As long as I’ve been an entrepreneur, I’ve come down decidedly against giving away the product for free. I learned this, oddly enough, from baseball. The owner of a popular professional team once told me:

“I’ll give away almost anything for free — food, T-shirts, bobbleheads, whatever. The only thing I won’t ever give away for free is the ticket to the game. If I do that, I’m automatically devaluing the product on the field.”

I’m not that hardcore. I believe free is OK for a very limited audience for a very limited time. Free is for beta, for pilot, for customer testing, for trial, and for generosity. In all cases except that last one, free is for learning and learning only.

Not for building audience.

But now it kind of is.

Now we’ve got a situation where an entire customer base, both consumers and businesses alike, have extremely limited funds and, even more relevant, drastically limited mobility.

This is an unprecedented age, and all of the rules have gone out the window. I’m changing my mind on free product strategy, for now. But where I won’t relent is on the requirement of countermeasures you need to benefit your business on the back end.

Here’s what those are, and how I’m watching them play out in this new normal.

Redefine your product

Zoom is the most obvious example here. In the space of a few weeks, Zoom evolved from a GoToMeeting killer to new way for people to congregate in a world of restricted (and in some cases, illegal) congregation.

One of my first feelings of normalcy during the pandemic crisis came late one night when four of my friends spontaneously decided to hop into a Zoom room. We talked for over two hours. We hadn’t done that in over a year, when we were all together in person.

Zoom is riding a wave, and that wave is crashing up against the need for us to all clog the roads and pollute the air and waste hours every day to travel to a desk when life returns to a better normal. Zoom changed videoconferencing, making it less about meetings and more about engagement.

Boom. New product category.

If Zoom doesn’t eff it up, and I know it seems like they’re trying harder to do that every day, the only thing close is Microsoft Teams. Which is Microsoft. Which is not the same thing. Getting your engagement from Microsoft is like getting your party supplies from Staples.

Enter a new market

At my current startup, we’re going after as many new markets as we can to drive new revenue to make up for the revenue hit we’re taking. One of these markets is an entirely new type of B2B customer, but using a product very similar to one of our existing products.

When we didn’t see any traction, we decided to change the pitch and bring on the first 10 customers for free — no time limit, no talk of charging them down the road, no catch. I actually argued against this for a few minutes, but to be honest, my mind had already begun to change.

We signed three customers the next day.

Now, there is no revenue here! This still bugs me. But it’s giving us an opportunity to define the product and refine the pitch so the next 10 customers will be paying customers.

This is not something I would normally do, but everything is upside down right now. The more time we spend worrying about the way things should be, the longer it’s going to take to thrive the way things are.

Push your roadmap

Last week, I wrote about how the move to subscription model pricing was going to be accelerated by the pandemic and the resulting changes to the economy. We’re also seeing free product strategy being used to capture some of that subscription market share.

Let’s look at video content. Last holiday season, Disney+ launched its subscription service, giving free 12-month subscriptions to millions of Verizon customers, and instantly allowing Disney to forego the slog of building up to critical mass. This in turn made their hit The Mandalorian spread “virally” like wildfire.

It remains to be seen how many Disney+ customers will convert when these free subscriptions end. However, that wasn’t the point. The point was to grab market share in a new content-as-a-subscription model. It was essentially a big bet Disney made to set themselves up as a winner in a new game.

Now that we can’t go to theaters or gyms or other people’s houses, the emphasis on free subscription as a strategy has accelerated.

The first advance came when content companies started pushing their first-run movies directly to subscription. That was a necessary move, but one that instantly increased the value of the subscription. The second advance was when content companies started giving away some of their content, like free games on XBox, free months of workouts on Peloton, and free access to content channels like Epix (meh) and HBO (all right!).

When something that had value no longer has as much value, temporarily or permanently, giving it away for free can add value to a new model. The free product now acts as a funnel filler for a potential customer base for a more feature-rich, lower cost, higher margin product.

I mean, it could just be a way to bring more people more entertainment in the midst of a crisis, but make no mistake, they’re introducing new customers to their product too.

Loyalty

I’m not super cynical. I believe there is at least some intent on the part of these companies to help keep us all going through a strange and dark time.

I’m also a big fan of loyalty.

It’s way more expensive to land a new customer than it is to keep an existing customer. This is the time to lean into that math and take some losses to keep your customers as customers.

Make your product free by wiping out charges until further notice, or at least offering customers to pause payments. And I’d recommend being proactive about this, not waiting until the customer asks if you’ll do it, because no one wants to ask, and it’s easier to just quit the product.

We’re all losing customers, so think of it this way: Your customers are laying off your product. You have a good chance at turning that layoff into a furlough by making a move before they do.

Just because

I don’t want to preach ethics here, but if there ever was a time to be charitable and give away product for no good reason, this is it. Not because it creates more market share, not because it generates loyalty, not even because it’s good for public image.

Just because it’s the right thing to do.

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