Why "Free" Can Be More Trouble than It's Worth

Today's post is inspired by Chapter 3: “The Cost of Zero Cost” in Dan Ariely's Predictably Irrational. The basic premise is that there is usually a cost associated with “free” items that the majority of people fail to recognize.  I'd like to explore this idea in relation to one of the greatest marketing devices ever created: the free trial.If a company is savvy enough, they'll offer a free trial to potential customers who want to experience the product or service before making a buying decision.  Nowadays almost every service provider offering services such as email marketing services and online fax services offer a free trial, with the exception of a few companies who offer 30-day money-back guarantees.  Even online tax services give people a form of free trial, allowing them to utilize the service for free until the point of e-filing.  This is all well and good—companies should be offering free trials. But, a problem arises when the users themselves begin to expect the “free” to last forever.Case in point: A woman once used the trial version of a popular online fax company to send a fax quickly. She doesn't send faxes often, so the free trial worked for her. The next time she needed to send a fax, she used another free trial from a different company.   The third time she needed to send a fax, it turned out to be time-sensitive. She was faxing her application for graduate school to an out-of-state university.  But it just so happened that the third company she used resulted in a time-delay that caused her fax to be sent late, meaning that she missed the application deadline.What could she do? If she had complained to the company she used, they probably wouldn't have listened or cared. After all, she wasn't a paying customer.  Her frustrations could be taken out on nobody but herself—and on the Twittersphere, which is exactly where I found this true story.Email marketing offers another example of someone misusing the concept of “free trial”—to the service provider's advantage.  Let's say there's a hypothetical man (probably a small business owner) who wants to start using email marketing tools to market his new company.  He signs up for the free trial on Constant Contact, which allows him to send emails to 100 contacts for 60 days.  Eventually, his contact list grows. But, instead of converting his free trial to the paid version, he decides to switch to iContact, which gives him up to 250 contacts.  After more list growth, he switches yet again to MailChimp, which actually offers a free plan for a list size of 500 contacts. “This is great,” he thinks. “I'll use the free version for a long as possible, forever maybe.”This is great—until the man's list size exceeds 500 contacts.  When that happens, he'll be forced to upgrade to MailChimp's 2500-contact plan at $30/month, which may or may not be something he's willing to do.  Now, let's say he has 501 contacts.  He could commit to MailChimp and pay $30 for 1999 contacts he doesn't yet have, or he could pay $12.95 to Benchmark Email for 1,000 emails to allocate as he'd like (a more economical choice).  But because MailChimp is the third company he's tried (and because he likes the product), he's already sold on the upgrade.  It's genius.In both examples, the consumer's motivation to make “free” last forever (Ariely would call this “keeping doors open”) resulted in a waste of time as well as limitations in utilizing the product/service (the hidden “costs” that are typically unforeseen).On the one hand, service providers would do well to recognize this bit of behavioral economics and strategize accordingly.  On the other hand, consumers might want to spend more time evaluating whether “free” is actually worth it (or, in the case of small business owners, whether a business can be built on it).