Getting established in a new industry or market is hard. In fact I just read a piece from Stanislav D. Dobrev and Aleksios Gotsopoulos called The Survival Chances of New Firms in New Industries: Legitimacy Vacuum, Structural Imprinting, and the First-Mover Disadvantage. Spoiler alert: Basically being a pioneer in an industry is extremely difficult primarily due to the constraints on resources that exist for these new industry pioneers.
Because of the difficulty that businesses have breaking a new product into a new industry, there has been a lot of experimenting with different business models to see what works. One of the most popular business models, particularly for tech services has been the Freemium Model.
From Freemium.org: The term freemium is coined using two powerful words ‘Free’ and ‘Premium’. It describes a business model where in you give away a core product for free and then generate revenue by selling premium products to a small percentage of free users.
Freemium came about to help new businesses with new technology, break down the barriers to business entry. By offering their service for free to users, the hope is that people will love the service, upgrade when they need to and tell other people about it.
This helps these new tech businesses establish some legitimacy in the market and give them the ability to raise further capital to push the project forward.
There are several popular companies that have used this model with varying success: Pandora, Evernote and Dropbox to name a few. I use Dropbox which is essentially a file sharing service. I get started using Dropbox when I owned a branding and design firm. The service allowed us to more easily share large files with each other on projects. True to the model, eventually we out grew our free service and had to pay for a premium model.
So what does this have to do with business owners who don’t operate primarily on the web? The idea is that when you are getting started, no matter what industry you are in, what are some ways that you can establish legitimacy through “free”.
I am going to share some ideas in the next few days on different ways that newer businesses can leverage “free” to get established in their business. In the meantime, think of ways that you can create value for people in a way that helps to move your business forward.
How have you used “free” to establish legitimacy for your business?