This new form of free is based on the economics of bits, not atoms. While the last century’s free was a powerful marketing method, this century’s free is an entirely new economic model. Gillette made its real profit from the high margin on the blades.Ī few billion blades later, this business model is now the foundation of entire industries: Give away the cell phone, sell the monthly plan make the video game console cheap and sell expensive games install fancy coffeemakers in offices at no charge so you can sell managers expensive coffee sachets.

King Gillette pioneered loss leadership by selling razors at a low margin to partners, such as banks, who would typically “give them away as part of promotions. Somewhere in the transition from atoms to bits, a phenomenon that we thought we understood was transformed. Twenty-first-century free is different from twentieth-century free. Most of us depend on one or more Google services every day, but they never show up on our credit card. He cite examples of organizations that have and are exploring free as a business model such as Loss leaders (Gillette, Jell-O), Ryan Air, Amazon Free Shipping, Zappos two way free shipping, Open Source software, Better Place Free Car etc. In Free, Anderson makes a compelling argument for exploring free as a business model by offering a part of the product free (Freemium) and other part of the product such as other features and upsell(s) are paid for by other customers (premium) or advertisers. Far more than a promotional gimmick, Free is a business strategy that may well be essential to a company’s survival. Anderson argues that in many instances businesses can profit more from giving things away than they can by charging for them.

The future of a radical price