Free services, free products and free samples have been the cornerstone of marketing ever since the first snake oil salesmen peddled their magical tonics, promising to cure all of your ailments by drinking the contents of their bottles (which was usually alcohol).

In the early days, you might say that “free” was also considered a “gift” by the customer. The balance of power seemed to be set squarely in the hands of the retailer whose generosity encouraged customers to “try before they buy” early on, in part because there weren’t as many retailers as there are now. In this retail history timeline, you can get a general idea of when different retailers formed their business. Arguably, there seems to have always been a push-pull relationship between the retailer and the consumer which, in many ways, has been affected by marketing techniques that rely on simple, human psychology.

The Internet’s Impact on Valuing Goods and Services

I feel that that “traditional” push-pull relationship has been severely impacted by the internet in ways that we are only just beginning to understand. Instead of walking into a store, the customer now visits what stores they want to, when they want to. You can’t force a “clickpath” through your site like you can with a retail store, because if a customer doesn’t want to shop or buy your services all they have to do is close their browser. Indeed, many disreputable sites grab onto your browser tightly, trying to pull out all the stops before they let you say “No.”

In my opinion, the internet has played a much, larger role in the valuation of goods and services than we might think. Part of the challenge, is that the internet is too accessible and too fast, which allows savvy users (a.k.a content creators) to take advantage of the tool. Over time, tiny, niche markets of illegal products and services pop up to fill a void when traditional businesses don’t (or can’t) move fast enough to meet demand. Other businesses support the “free and cheap” model, however, by undercutting realistic prices. For example, wholesalers sell goods without any sort of mark-up, setting a lower bar for products that are normally priced higher elsewhere to cover a store’s costs. Bartering systems and online auctions also deflate prices, but also inflate them in some cases when the product is rare and unavailable elsewhere.

When used appropriately (and legally) the internet is a powerful marketing tool that offers a different model than traditional, brick-and-mortar strategies. The challenge with the internet, however, is that accessibility has a hidden cost. If not diligent and managed correctly, easy access and constant “clearance” prices can breed familiarity, raise typical expectations and blur the production value for the consumer. As a result, everyday people who do not make their living as an artist or a writer or a professional blogger don’t understand the cost involved when copyright is violated. People who once saved for that Rolex watch or pair of Manolo Blahniks either find them for next-to-nothing, or use credit (another form of accessibility) to fulfill their immediate need.

Used to getting what they want (when they want it), a new breed of consumers has cropped up that is negatively impacting businesses that make money on intellectual property (i.e. content or artist creation) in this economy. I dub them the “freemies.”

What is a Freemie?

A “freemie” is a consumer who believes that because they want a product they should have it for free because the business or individual is making enough money without them. They are the rebels of the consumer generation, the ones who will knowingly (or unknowingly) pirate intellectual property because they believe that they can’t be caught.

YouTube!, for example, expressly states in its rules an official policy about copyright. Yet, there are movies offered on YouTube! in twelve minute chunks that can only be removed by “the official copyright holder.” Besides YouTube!, there are file-sharing sites, image search engines, blogs, etc. that offer the “free” product of the day which (from what I’ve found) not only violate the original copyright — but cite Creative Commons.org as the copyright on holder for the person offering the freebie. Using CC in such a way is, in my opinion, incredibly heinous because not only is the person in question offering the product of someone else’s work — they are taking credit for creating it, too.

Couple this underground market with the sense of entitlement that “freemies” have, and it ends up killing a creative professional’s chance of profiting on their work. We’ve seen “freemies” either set out to create a better mousetrap for next to nothing, undercutting the full-time professional’s cost of doing business in unreasonable (and unrealistic ways) — or they take that same mousetrap and post its designs for free believing that they are providing a favor for those that want those designs.

How to Avoid the “Freemie” Impact on Your Business

Although the battle to protect copyright is far from over, I believe that there are ways to resolve the “freemie” experience peacefully. Since I am more familiar with writing, in my mind the answer to turning a freemium into a premium, is to avoid what conventional wisdom might tell you.

DON’T Try to Correct or Get Angry with a Freemie — As someone recently put it, “Would you walk into a McDonald’s and steal a hamburger? No? Then why would you steal (insert item) from me?” While that is tongue-in-cheek, it’s a bit less threatening than “I’m going to sue you.” There is a risk with attacking a freemie, and that risk can be your online reputation. A negative online reputation may steer paying customers away from your store even if the freemie was “in the wrong.” Although, if you have a legitimate copyright challenge with what someone is doing, by all means act accordingly but proceed with caution. You don’t want a legitimate complaint to turn into a “he-said, she-said” scenario.

DON’T Ignore the Freemies Completely — Instead, build “free” as part of your business model to offer free samples to new customers and allow for easy distribution. Accessibility should be a consideration in any online business — personal or otherwise — because it is a function of the internet.

DON’T Try to Compete with a Freemie — You have to eat, pay your housing costs and get something nice for yourself every once in a while. Just because freemies exist, doesn’t mean that you should try to compete with them by undercutting your prices or waste time trying to create something that’s better than what they’ve done. Consider the time you have as precious, and dump that into energizing your business rather than competing with “free.”

DO be Realistic about Your Prices — Do yourself a favor, and price yourself out competitively. Find out what other people are charging for the same services and know who your real competitors are. The more competitive your prices are, the less chance you’ll have of sticking out like a sore thumb.

DO be Honest about Your Production Value — A professional resume writer may charge in upwards of four hundred dollars for a resume. If you’ve never written one for another person before, can you be honest with yourself about the quality of the product you provide to charge the same rate? Again, this comes down to knowing not only what you are selling, but how realistic your expectations are of selling it at the quality level you provide.

DO Flaunt Your Specialty or Talent — By having a specialty, you are proclaiming that this is the area you either are an expert in, or one that you are proficient at. Avoid the over-used “expert” tag, and opt for speaking to your vast body of experiences that support your rate, your product quality and your reputation.

DO Remember that the Freemie Customer is Not Every Customer — You know your customer best, and if you do you should know that not every customer is a freemie customer. Here’s where your web analytics and other business metrics can really help you define and cater to your existing market.

DO Learn from a Freemie — What are your freemies telling you? Did your product get delayed in shipping? Did you miss hitting a trend at the right time and place? Take a lesson from your experiences with a freemie and try to anticipate the next time something like that might happen.

What about you? What are your thoughts on how “free” has changed the way we look at the value of a product? Creativity?