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The (Real) Story of Free One of the major advantages of the seemingly contentious agency model is experimentation with pricing. In a print business, supply chain represents an entire business strategy for the publisher to be able to move product based on the availability of the physical book in the retail space. But, this notion is completely lost in an eCommerce setting due to the binary nature of the commodity itself. In a digital business, pricing strategy replaces supply chain in the hustle to get more product into the hands of our consumers.
One of the most discussed pricing strategies is 'Free'. Anecdotally, free product has been said to increase print sales of the same title, to play a marketing role in acquainting customers with an unknown quantity, to allow for a later up-sell, and to provide branding opportunity. This week, Kaplan is placing nearly 100 of our eBook titles on sale for free for a week on the iBookstore. Something of a grand experiment, we've planned a veritable marketing bonanza to publicize the promotion. In the end, the experiment itself will yield more information about our consumers' interests, how we connect to our readers, and our eBooks themselves than any other products we are selling this year. Free is not easy. For a marketer, Free is really not easy. In fact, I would argue that Free is more difficult than a regularly priced book: Free comes with a different set of expectations. Free changes what we consider important in a product's life cycle. ROI on Free is virtually impossible to calculate. In this post I'll be covering the reasoning behind our experiment in Free, what our expectations are for our the campaign, and how this affects our products in the life cycle. In a future post, I'll be sharing the results of our experiment. I'd also invite others to post comments with their experiences with Free. Expectations Questions to ask: What can you point to in order to show that Free has made an impact? What impact are you expecting? When we put a product on sale for free, sales numbers, while great for tracking visibility and market penetration, say nothing about revenue. This begs the question: is a publisher's sole purpose in making revenue, driving income? While ultimately I would argue yes, the drivers of this income can manifest themselves in many different forms. Free is one way to drive income, albeit indirectly. In this case, the business strategy is simple: offer free product to your customers, introduce new customers to your product, and hope they buy more in the future. This is actually more difficult than one would think. In fact, customer loyalty is, for most companies, something in which they have to actively participate with their customers, teaching consumers how to navigate their unique offerings from one product to the next. In short, most companies need to instruct their customers on how to be loyal. As marketers, we've worked hard on ways to capitalize on this idea, on how to drive both existing and new customers to our products. While there is no reasonable expectation that a new customer will be converted into a 'loyal customer' as a direct result of this one promotion, we do feel that for our existing customers, we are handing them the next product in a series of Kaplan products that are highly relevant at various times in their academic and professional lives.Do I believe this campaign to be a good branding exercise? Absolutely. Do I think this will bring new customers previously unacquainted with our offering into the fold? Yes. Do I think this campaign can help with a later up-sell opportunity? Possibly. Do I think this campaign will drive print sales? Maybe. Life Cycle Questions to ask: What is the life cycle of a free product? In the absence of revenue generation, what is the value of Free? What constitutes an acceptable deviation from the 'traditional retail life cycle'? Products destined for 'the traditional retail channels' are produced, placed on sale, marketed, may or may not have their price affected by a promotion, sell out or continue to sell on. Sales numbers are analyzed. Revenue is made, converted into assets, reinvested. New products are created. The value of such a product lies in the revenue it generates and the future products it makes possible. A free product causes a breakdown in this cycle: Sales numbers express awareness, not dollars or marketshare. Uptick in sales patterns overall are a result of the collective power of the free offering and cannot be directly correlated to the strong sales of one or more products. Consumer motivations are different. While the price is only one of many factors in a consumer's mind upon purchase, it is one of the most--if not the most--important factors. In our case, we've determined that the branding and awareness generated by this promotion constitute a high enough value to take these products out of a 'traditional retail life cycle' and let consumers download for free. We've agreed that the life cycle of these products will not follow a traditional trajectory. And, we're taking a risk by placing a bet on the fact that the collective results of this campaign will outweigh the alternative, namely a 'traditional retail life cycle'. ROI Questions to ask: Is ROI even applicable? What constitutes investment with Free? What return is expected? In the case of Free, the investment is materially the exact same as would be the case with any other product. However, without a dollar sign attached to the product, it becomes increasingly more difficult to quantify this investment. A dollar sign (read: a retail price) combines one part what we think our effort is worth, one part what we expect the consumer to pay, and, of course, one part real cost of production and operation. Free shirks all of these designations and simply stands alone in the retail space, selling itself solely on the (promise of) content included therein. Without a quantified investment, how can one even begin to calculate what the return should be? To this question, we can only say what we'd like to happen. The numbers are yet to come in. The awareness results are yet to hit my desk. The sales spikes are yet to be seen. And, the investment is yet to be justified. Here's to hoping all of these things will provide favorable returns. * * * In the end, the true power of Free lies in the overall marketing campaign itself: Messaging will be sent out, product awareness will be heightened, branding will take place, content will be evaluated, new customers will be created, repeat customers will purchase other offerings, relationships will be formed. Front-end wins out over back-end. Perhaps, the real power of free lies in how you set it up. 
Brett Sandusky is Director of Marketing at Kaplan Publishing. All 95 Free eBooks that make up this campaign can be accessed at www.kaplanpublishing.com/iTunes
from iPhones, iPads and iPod Touch devices from August 24-30. A follow
up on this campaign will be made available, as well, with details and
analysis.
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Comments: 3
bowerbird [24 August 2010 04:07 PM]
brett said:
> we've planned a veritable marketing bonanza
> to publicize the promotion
and this blog entry is part of that "bonanza"...
so how lucky we are, the people who read this blog,
for content on "the tools of change for publishing",
to be recipients of your promotion's publicizing...
-bowerbird
Marny Smith [24 August 2010 07:03 PM]
I think this is an amazing experiment and I am very interested to hear the outcome. Bravo to Kaplan for trying something new - I hope your customers appreciate your generosity.
John Hilton III [25 August 2010 09:44 AM]
Thanks Brett for an interesting post. You mentioned that there is "anecdotal" evidence that "free" drives sales. Thought you might be interested in this study that gives some empirical data on the subject:
http://www.johnhiltoniii.org/free-e-books-dissertation-published/
Short version: free e-distribution was correlated with moderately higher print sales.