Establishing yourself as an entrepreneur requires laser focus. What is more important, the marketing strategy, building a team or raising capital?
A frequent misconception is that you must provide your services or products for free as a newbie in the industry to grow brand awareness.
The freemium business model became popular in the early 2010s. It is generally associated with online services or gaming. The model is a user acquisition strategy that aims to have users use a limited version of a product for free for a limited time. In doing so, the company lowers customer acquisition costs by allowing consumers to use the features of a product.
Freemium works for SaaS platforms; however, for startups with a physical product or a service-based business, giving away too many free things pigeonholes and stifles individuals. While offering free services can be a strategy to gain exposure and build your reputation, several potential drawbacks exist.
1. Devaluation of Your Services
Offering services for free can inadvertently devalue your expertise and offerings in the eyes of potential clients. People might start to perceive your services as less valuable or inferior.
Marketing psychology plays a significant role in consumer behaviors. Pricing can affect consumers in many counterintuitive ways. A higher-priced service or product generates a greater perceived value. Many times, people associate lower prices as low quality.
2. Time and Resource Investment
Providing services takes time, effort and resources. When you offer services for free, you’re essentially investing these resources without a direct financial return. This can strain your company’s operational capabilities, especially if demand for your free services becomes unexpectedly high.
Invest in understanding marketing and sales strategies that will attract paying clients. Time is most valuable as an entrepreneur; focusing your energy on the right things will help you spend your time wisely.
3. Uncommitted Clients
Free services often attract clients who are less committed to the process. They might not fully value or appreciate the services they’re receiving since they haven’t invested financially. Then as the business grows, transitioning from the free model to a paying one will be difficult.
4. Missed Opportunities for Learning
Charging for your services lets you understand the market’s willingness to pay for your offer. Pricing and the value proposition are crucial aspects of business, and by offering free services, you miss out on valuable insights into your market’s preferences and expectations. Additionally, there will be a lack of focus on sales and marketing, which will damage the bottom line.
5. Burnout
Constantly offering free services or products leads to burnout. Between taking on too many clients, having to factor in shipping costs if you sell products and meeting deadlines for non-paying projects, you leave little time to focus on growth, innovation and high-quality opportunities.
Without proper compensation, the new entrepreneur creates unnecessary stress and exhaustion. Also, if many entrepreneurs in your industry offer similar free services, standing out and differentiating yourself can be challenging. Clients might struggle to see why they should choose you over others.
Pivoting into a new realm of business is challenging enough. Believe in the value you provide. Even if you request a small fee, it is better than pigeonholing yourself as a free business person.
Read the full article here