This article originally appeared on American Express OpenForum
The Internet has forever changed the way we do business. For some companies it has brought in easy revenues, for others — like movie and book stores — it has seriously dug into profits. For companies that are trying to regain their former market share, it may be time to consider a bold new strategy. This may mean targeting an entire new set of customers and even giving away your product for free — at least in the short term.
Consider Luke Skurman, CEO of College Prowler. His business model was based around the idea that people would pay an annual subscription to access hundreds of student reviews of different colleges. Things turned out differently: not enough people were willing to pay the subscription, and Skurman found himself in a tough position.
He reappropriated his company to revolve around selling sales leads to advertisers and universities. It was certainly a pivot, but what made this pivot unusual was that he decided to give away all the college reviews by students for free. College Prowler collected data from those who had signed up to read the reviews (with their permission) and turned it into a very profitable set of information.
College Prowler’s page views are now up 500 per cent and the company has partnered with 10 other companies that sell sales leads to universities. This type of strategy won’t work for every business, but it’s worth considering an unconventional approach if you’re in a position to do so.
Here are two things you need to do before deciding to give your own product away for free:
1. Consider what you already have
In Skurman’s case, he realised that he had valuable information in his user database — information about a person’s age, location and interests. It wasn’t especially profitable to College Prowler, and he hadn’t previously thought about the revenue-driving resource it could turn into.
In the case of Google, given the mass popularity of its search engine, the company had an endless supply of search terms that people were plugging into the site. The challenge then became figuring out how to turn that vast body of information into profits.
2. Figure out who your product is valuable to
Skurman determined that College Prowler’s user information would be highly valuable to advertising agencies and universities. He got in touch with these entities and turned unused information into profits.
To continue with the Google example, the company developed a system of targeting ads to people based on what they were searching for. The search results are free, but the ads bring in the profits.
Keep in mind that this certainly will not be appropriate for all businesses. But if it’s time to shake things up, it’s hard to think of a more radical way to do so than to stop charging for your product.