by Adam Juda on Saturday, June 25, 2016
Six years ago, a video featuring two entrepreneurs in the hugging niche went viral. While the free-loving hippie offered his product for free, the more enlightened capitalist decided to charge for his "deluxe hugs." Within an hour, the hippie had learned a valuable lesson: hugging should be left to professionals with a firm grasp of pricing. The capitalist earned an impressive $36 an hour while his competitor remained penniless.
At the time, I shrugged the video off as a silly diversion. Yes, it demonstrated that businesses can thrive when competing against competitors with lower prices. But surely, little else can be gleaned by watching people offering hugging as a service (HAAS), right? Wrong! Another lesson relating to pricing has surfaced from the most foul depths of the hugging industrial complex.
An article released last month details the alleged exploits of a hugging entrepreneur who allegedly chose to provide free hugs to his clients.
Having not sought out my advice, the entrepreneur allegedly found himself in the midst of a terrible quandary upon completion of one particular hug. He may have realized that although he had provided a service, he had earned little in the way of monetary compensation.
He allegedly attempted to add a sense of urgency to his post-service negotiations. While I applaud the use of urgency in increasing a customer's willingness to pay, the alleged tactics employed may have been a bit more extreme than I generally recommend. He allegedly punched his customer in the face.
Although this titan of industry allegedly unleashed his displeasure more severely than most would consider proper, the emotional turmoil that he experienced is quite common amongst novice merchants when they discover that "free" isn't a surefire means to immediate profit.
Free is not a profit model. Free is not a silver bullet. Free is merely a technique that will sometimes lead customers to purchase up-sells or engage in word-of-mouth marketing. Free offers should be seen as a risky, but potentially powerful, approach to marketing that provides absolutely no guarantees to the vendor. Businesses have no right to blame their customers when free fails to achieve business objectives. The fault always lies with the merchant for not implementing free properly.
Whether you're building the next hugging empire, or a more traditional business, you need to think about your monetization strategies. Relying on folksy wisdom can lead to disastrous results. Contact me to learn more and don't forget to buy a copy of my book on software pricing. Don't worry, my prices are always clear and upfront - and I never offer free hugs to entice potential customers.