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Bill It, Kill It, or Keep It Free?

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Bill It, Kill It, or Keep It Free?

MIT Sloan Management Review,

5 Minuten Lesezeit
5 Take-aways
Audio & Text

Was ist drin?

Two marketing specialists tease out the hidden costs of freebies. 

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Editorial Rating

8

Qualities

  • Applicable
  • Concrete Examples
  • Insider's Take

Recommendation

Growing a company’s bottom line doesn’t always require finding new markets or attracting more customers. Plenty of opportunities exist to generate extra revenue for services companies already provide for free. Writing for MIT Sloan Management Review, marketing professors Wolfgang Ulaga and Stefan Michel lay out how companies can start charging for some of their services without jeopardizing sales quotas or customer satisfaction. Their well-researched case for “free-to-fee” transitions will motivate business executives to take a closer look at their business models.

Summary

Companies often provide free services to customers to set themselves apart from the competition or to secure long-term customers. But failing to charge for services can also backfire. Customers may get used to giveaways and protest when companies ask for money for other services. Also, customers may believe a service is of little value because it doesn’t cost anything. Furthermore, burying the costs for services in the overall price of a product means some customers will pay for services they don’t use. You also risk alienating your distributors if you give something away that they’re charging for. Moreover, employees providing fee-less...

About the Authors

Wolfgang Ulaga and Stefan Michel are marketing professors at INSEAD in Fontainebleau, France, and at IMD in Lausanne, Switzerland, respectively. 

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