Start Up Blog

The new industrial revolution – Chris Anderson

Posted in entrepreneurship by Steve Sammartino on November 26, 2012

I’ve been a big fan of Chris Anderson for a long time. And he’s done it again. While I haven’t read his new tome “Makers – the new industrial revolution” – if this talk is any indication of the content, it will be mind blowing. Not only is Chris one of the most insightful technology visionaries, he also has a knowing way to explain his ideas with simplicity and conviction.

I’d recommend this talk to anyone who is interested in the future – it might just be the best hour we invest before the end of the year. And this talk ensures we know what’s coming, whiling helping us realise the gravitas what’s already happened. Enjoy!


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How to price your product

Posted in entrepreneurship by Steve Sammartino on December 2, 2009

Pricing is a difficult thing to get right in the marketing mix. Often we get all other 3 P’s (product, place promotion) right and that wrong…. and instead of revisiting it, we mess with the product.

There is no hard and fast answer on how to price a product in a startup or a web service, especially as it pertains to pricing models. But there are two simple pieces of advice I can give.

1. If there is an established pricing method which is accepted and liked in the market, go with it.

2. If consumers generally despise how things are priced in the category you are entering, change the model, and let everyone know about it.

In the first example the ethos is this: It’s hard enough gaining cut through with our product without adding unnecessary complexity to the decision making process. Especially when you have a new and untested offer.

In the second example the ethos is this: The pricing model becomes the main feature. It’s the reason for the switch to you, other parts of the marketing mix will then require far less innovation to gain the cut through a startup needs.

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Delayed Revenue Model vs Free (DRM)

Posted in entrepreneurship by Steve Sammartino on July 30, 2009

I know I am being a bit of a dog with a bone here. But we really need to put this ‘Free’ stupidity to rest once and for all. Sure it’s semantics, but this is what the Free model really is:

Delayed Revenue Model

If we have a so called ‘Free’ model, we are simply providing resources (at out cost) in order to extract revenue through alternative means later, or via a trade sale to incumbents who see value in what we have created. In both cases the ultimate goal is Revenue.

delayed

In many ways it’s riskier to go down the free track, simple because time and money are inextricably linked. If we don’t end up ‘Monetizing’ (another word I hate) then we are simply in the wealth transfer business.

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Free – is not a business model

Posted in entrepreneurship by Steve Sammartino on July 2, 2009

Firstly – I’ll start by saying I think Chris Anderson is an incredibly clever guy. I thought his book ‘The Long Tail’ was and is the future of business. But when it come to ‘free’ he has got it wrong this time. As has Seth Godin and all the other ‘free’ converts.

As Malcolm Gladwell correctly points out, they are forgetting many of the fundamentals in business, by getting caught up in the stale newspaper argument, which in the new digital economy, is the easy and soft target of who will disappear. The irony of this ‘newspaper’ argument is certainly lost in the broader economy. The non digital economies are a lot bigger than newspapers and other beleaguered digital industries.

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So why is it that ‘Free’ is not a business model. Quite simply, any business without a revenue generation model wont exist over time. We only need look at the the dot com bust of the late 1990’s to see this reality. It’s also much too easy to get caught up in the success of Google and others which ‘started free’ to build demand. But many of the subsequent ‘Free’ offers like Youtube, Facebook, Myspace, Flickr may have been successful for the owners, only because they sold to a business with a large chequebook – not because the business itself was financially successful. The Google business model is not too dissimilar to that of Network TV – generate eyeballs, sell advertising….. Nothing new here.

The real question in the so called ‘Freeconomy’ is how many businesses can be supported by the advertising sales model? So why the idea of ‘Free’ is being touted as new is beyond us here at Startupblog.

Here’s what ‘Free’ really is – it’s part of the marketing mix. It’s the 4th P – Promotion. It always has been and always will be. Anything a company gives away for free is a promotional tool to sell something. If these businesses who use the so called ‘free model’ fail to sell something there are only two options for them as time passes:

  1. Go broke & run out of cash
  2. Get bought by large company who values what they have created, albeit ‘non-financial’

Whether it be Proctor & Gamble, giving free shampoo in letter boxes in 1957 or Google giving free search and maps in 2009. It’s part of the mix to attract potential customers, who will be converted into on going revenue. It isn’t free. Free is not a business model, moreover it’s sampling & promotion for associated revenue generating activities. So to call it the future of business as ‘free’ is absolute folly.

Sure Anderson can argue that digital stuff is becoming so cheap it may as well be free – as per the transistor example he uses. But the thing that really costs money is building demand and infrastructure – the kind of stuff that’s really expensive. The other point to consider is the example of some things which previously cost money (a newspaper) is now available free on line, doesn’t mean everything is heading down the free path. Rather it means that certain industries are dying – not that ‘paying’ will be a thing of the past. In fact there are just as many examples of items which were once free, consumers are now being charged for Education, Toll roads, Water, Seeds.

The advice I’m giving here is simple.

No business can survive without revenue. Free, isn’t free, but a promotional expense, the 4th P. If your industry is getting flooded with free – it’s on it’s deathbed – look elsewhere. Industries die all the time when the revenue dries up just like those trying to cope with the current digital conversion. Don’t assume you can build something awesome and give it away with the ability to sell it (the business) or something associated later – chances are you’ll run out of money before that.

The future of business isn’t Free, and the idea isn’t new, it’s part of a complex marketing mix. And if you want to own a startup to thrive, my advice is simple. Have a price which isn’t all zeros.

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