Why ‘free’ will eventually cost you

Remember when the airline seat with extra leg room was free? Shutterstock

Remember the days when free really was free? When reading a news article to the end didn’t mean having to get over, around or through a paywall. Or when loyalty schemes actually rewarded loyalty with decent rewards, not “spend $200 get a $20 reward voucher that can only be spent with us”.

The recent suggestion by Australia Post that letter delivery should be slowed unless Australians pay for a “priority service” is the latest signal that what has been considered free or “regular” can easily be bumped up by marketers to “premium”, with the associated cost.

Marketing is changing in response to a new world order in markets. The era of the liquid and dynamic market, as Coke calls it, is here. Markets move quickly. Getting a competitive advantage is becoming more difficult, but so is sustaining old business models that are unable and too rigid to keep up with the pace of change.

Banks were among the first to feel these forces. Online competitors, globalisation and more open competition forced them to move us firstly away from tellers to ATMs, then to the internet and now of course to mobile devices where the cost of a transaction to the brand is in the range of a few cents. Credit card rewards became harder and harder to get and the three tier system was replaced with five tiers – low-fee no rewards, low-rate with rewards, silver rewards/low rate, gold rewards/low rate, platinum, and WOW, you have that card!

Airlines had the same dilemma. In the face of smarter competitors entering the market with deeper pockets (just ask Qantas), they sought more agile strategies and different service offerings in a drive to change customer expectations and perceptions and raise new revenue while simultaneously reducing cost.

Enter premium economy. Cattle class made stylish. If the customer would like not to be elbowing or having their fellow passenger fall asleep on their shoulder they could pay just a little extra and fly in a bit more comfort. Or basically get the same experience they had before the introduction the 3-4-3 configuration, the bane of so many of us on long-haul flights. While it failed on the uptake, it did reinforce that if you wanted what you had before then you had to pay futuristic prices.

The illusion of free

And now the internet. It’s all free right? No. At the moment it’s the selling of our private information on a scale surpassing anything seen before that is paying for our “free”. Remember condition 57f of the terms and conditions that you quickly scrolled to the end of and accepted?

Paywalls changed the media model. Now newspapers are meant to be prestige products, but feel very much like low-cost promotions of their online sites. Someone needs to get that marketing right.

In digital media, it’s data that is helping the giants monetise and grow on a massive scale. Just take a look at the type of location information Google collects – it’s a marketers dream. At the same time more ads are jumping into our social media feeds.

Those big social media apps and sites that so many of us now deem essential to life on Earth have got us hooked on the free offering, but the social value they provide to us means many of us would potentially pay a nice monthly fee to keep that access alive 24/7.

It was never free

In 2004 two now very famous marketing academics by the names of Vargo & Lusch wrote a seminal paper arguing essentially we will never own a product but merely lease it. Companies loved this. They have been working to make us accept this concept ever since.

In other words it never was free. That was just the basic value offering you had accepted. It wasn’t meant to last. As they say, all good things come to an end.

The “better value” offering isn’t based on price alone anymore, but more the value that we derive from it in so many ways – be they social, financial, psychologically, or whatever. The experience factor. What you thought was free but now pay extra to have.

Australia Post will by no means be the last company to move down this path. The marketing world of 2014 is destroying old business models without fear or favour. And with that destruction will come changed perceptions of what “free” really is.

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