October 13, 2009

Chris Anderson, the editor of Wired and author of Free, recently gave a keynote speech at Garage’s Revenue Bootcamp. The main points of his speech were:

• Digital economics has created a deflationary economy in which there is near zero marginal costs for distribution. Hence, content is getting cheaper and approaching free.

• Today’s generation expects things for free because people have internalized these digital economics. Adults, by contrast, grew up believing that “free” is a gimmick—i.e. “There’s no such thing as a free lunch.” (Watch this panel of young people to see the accuracy of this observation.)

• Quality is more and more defined by relevance and not price. Thus, you can’t use price to win market share when everything is free. You have to use product differentiation and relevance.

• The challenge for companies is to create premium goods and services that they can sell to “free” customers. Companies need to offer people ways to save time, increase their status, or heighten their reputation and convert these ways to cash.

If you’re in a content or online service business, you’re well aware of the pressure to lower your prices to free. The key point is that what customers are willing to buy is far more important than what you’re willing to sell. To learn more about Chris’s concept, watch his keynote here.