Implementing what we know as “the freemium model” scares a lot of businesses, and understandably so. It’s not necessarily a groundbreaking idea; consumers are used to free trials of online services, a few issues of a magazine, or a song off of an album. Yet in Nicholas Lovell’s new book, The Curve (US Hardcover, Portfolio Penguin, October 2013), he suggests that free is not only an inevitability, but it’s actually in businesses’ best interests to start giving away some of their products for free.
Lovell’s solution to the inevitability of free is to give away products to build an audience, and then offer a variety of products to give supporters different ways of converting to customers. As Lovell demonstrates through multiple examples, a large amount of revenue can be built from only a few high-paying customers, making sales less about number of units and more about the monetary value that consumers place on products they love.
Each level of consumer exists somewhere on Lovell’s Curve, and they are not at a fixed point. The goal is the move them from freeloader to superfan. Listen to Lovell explain the whole process in the video below.
A prime example of the Curve is Lovell’s detailing of Pocket Frogs, a gaming phone app. The app itself is free, but there is the potential to spend money within the app. Approximately only 4% of users ever spent money in the app in the game’s first year, but their revenue was estimated at about $3 million. Pocket Frogs users have the option to spend $.99, $4.99, or $29.99 on packages within the game. Forty-two percent of those who spent money in the app bought the $4.99 package, which accounted for almost half of the revenue made from the game. Only 8% of those who spend money in the app bought the $29.99 package, and yet, that accounted for 49% of the revenue for that app in a year.
So how can the Curve be applied to publishing? The clearest publishing-related advice Lovell gives is for fledgling writers, as he writes from the well-informed perspective of having self-published a book. He frequently cites the success of Amanda Hocking, a self-publishing success, who then got a traditional book deal. The Curve, in a way, is actually based off of her successes. So unsurprisingly, Lovell says going digital and self-publishing is the way to go for new authors. He sees curation as a barrier to entry, and self-publishing as an easy way for authors to gain fans through low price points. Authors then learn about those fans through direct marketing data, and are able to use that fan base to get noticed by a publisher. Self-publishing also allows authors to move away from what Lovell describes as the “tyranny of the physical,” as consumers no longer only respond to a product that they can hold in their hands. But once a self-published author gets picked up by a publisher, this is where creating unique opportunities for fans to spend their money comes in. And as we saw from Pocket Frogs, it only takes a small percentage of superfans to create a lot of revenue. Read More