More on whether we get what we pay for

A while ago, I wrote a piece on the ‘freemium’ model that seems to be growing in relevance as people’s patterns of consumption of information and products, and their willingness to pay for them. 

If you are interested in this topic and have a spare few minutes over the weekend, you might like to take a look at this slideshow (warning - there are 263 slides). Since we're all time poor, I thought I'd highlight that of particular interest to membership organisations are slides 200, 216 and 217 [and if you are interested in social media and platforms - or have strong feelings about them either way - check out slides 242-246].

These suggest that "given a choice between FREE and NOW, people will surprise you". This is a similar argument to the one we see played out (and may see increasingly being played out) where people would rather pay to receive something from a trusted source rather than get similar (or identical) information for free for themselves. This may seem to be a question of quality but is in many ways a question of time. In buying, say, The Economist at a news-stand, we are choosing to pay a few quid rather than spend time trawling numerous news sources and collating and checking information (and arguably getting trained up in analysing such information).

And as I said in my earlier piece, we are not really buying a product, we are buying into a brand or a set of beliefs (The Economist, with its stated opinions and single voice undiluted by named writers, is a prime example of this).

It's the same with member benefits. As member organisations, we provide access to information that is selected and checked based for quality, accuracy and relevance, or provide services that are directly of interest and use. Of course, individuals could find details of similar events or information for themselves. But that would take time and there would be no guarantee of relevance. And they wouldn’t get what they are really paying for - the ability to say I belong.

Lesson: we need to get better at stressing the added value of membership.

David Gillespie builds a simple 2by2 table to illustrate the basic 'freemium' model outlined in my earlier post - use immediate, free services to encourage people to get involved in the anticipation that some of them will buy paid-for services that they receive immediately and/or wait for. Here’s how I conceptualise this model:

 

(flowchart)

  • Most users won’t pay [extra] for “products” (services, benefits or information) at any point [black arrow]
  • However, once they are interested in low-level products (available free and now), it may be possible to tempt them into paying for better or more products immediately, with the promise of more of the same to come – eg through annual membership fees or a subscription – or even through a system such as pledgebank [purple arrows].
  • Users who (due to cautionary natures or financial pressures or attitudes) choose to wait for services to become free may still in time be able to be moved into paying for services, once the efficacy, utility or enjoyment of such services has been proved [blue arrow].

Lesson: we need to get better at knowing what to give for free, what to charge for, and why.

Finally, it’s important to note that when we talk about ‘payment’ we don’t have to mean financial.  The unique thing about membership organisations is that they state that in their very nature the whole is more than the sum of their parts – we can achieve more together.  Rather than a traditional production: consumption model with the Head Office of an organisation delivering services to passive members, this model can also be used to think about how to get people from receiving benefits (attending a meeting or event, reading articles on a website) to giving time by participating actively in their co-production (chairing meetings, running events, commenting on blogs).

Lesson: we need to stress what it is we value (time, effort, hard cash) and ‘rewarding’ our members in kind (thanks, better communal outcomes, tangible benefits).  We need to stress that the value is created and received by the whole community.

 

Last updated at 14:50 Fri 30/Oct/09.
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AuthorComment

Another excellent post Katherine. I have just read Chris Andersons book 'The Future of Free' which you highlighted in a previous post, where he discusses the 'freemium' model. I agree with what you say here. There may be an 'abundance' of information, but this means there is a 'scarcity' of time. Everyone can't read all the blogs, articles etc on topics, but membership organisations can become aggregators of that info, and 'the place to come' The one challenge we have though that is posed by the 'freemium' model is the same one Microsoft faced (which Chris highlights in his book) with the growing dominance of Google and all its related (free) services.

How do established membership organisations who may have a large number of paying members change their offer? The model of giving a 'membership' away for free and then charging for 'extra services' as and when used byorganisations may be great for small/web based organisations...but if a membership organisation depends on the income for membership to survive--can this model ever realistically be fully implemented - if only 5-10% of members will ever pay for anything? in addition to the falling revenues being generated by advertising which much of the success of this freemium model is based?

Cheers Claire

Katherine's picture

Katherine

Specialist Editor

Thanks for your comment Claire - and your question!

It's a very tough area. I think it's a model - not necessarily the one to go with. I think the thing these trends suggest is that we cannot (as large membership organisations) cross our fingers, shut our eyes and hope it will be ok). It seems to me that there are two main options:

  1. Adopt the free membership/paid services model, and accept that you will need to reduce costs if there is a drop in income, but plan for this income to rise again and end up higher than it would otherwise have been.
    1. Create benefits that are so valuable that people want to pay for them through membership, or in other words create something people want to be a member of. In this sense, it is the intangible offer (the sense of belonging and identity I referred to in my earlier post) which is what we choose to pay for - something that 'money can't buy'...

I'd be interested to know what you think...

Although your emphasis is on membership organisations, the same applies to all organisations who are in contact with clients/users. The growth of social media only serves to emphasise that anyone to whom you are providing a service or product is, or at least should be considered a member and treated as such. After all it isn't just the service that they are 'buying into' it is YOUR service. It is you and your organisation. You are the trusted adviser/provider. So many organisations in all sectors miss out on the opportunities that there are to develop these relationships. Social media can help us to become effective membership organisations. I am running a social media and voluntary sector experiment to explore how small VCOs can use various forms of social media to help them to achieve their goals. You can find this here or follow it on Twitter at #socialmediavco. Now to walk the talk.

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