Wednesday, May 14, 2008

How "Free" can be Profitable

Sometimes, the fastest way to a paying customer is through one who doesn’t pay: a pilot customer. Such an idea is anathema if you believe the only thing that can come from providing something for free is the chance to provide more of it for free. I understand you may not like the idea of a pilot customer, since--I'm just guessing--you’re entering business to make money. Let’s say, however, that it’s three months since you started your company, you have no prospects ready to sign an agreement, and your spouse is starting to give you impatient looks and heavy sighs. Maybe a pilot customer isn’t such a bad idea after all.

Actually, each of us is asked to be a pilot customer nearly everyday. When I go to my neighborhood fresh produce store, for example, my goal is buy bananas and strawberries. But I have to navigate around stands offering free samples of stuff the store wants to push--stuff I don't need. This often includes salsas and spreads. But it's free, so I usually try some. One day, the salsa was accompanied by a brand of tortilla chips that I’d never tried before. I usually buy tortilla chips at a grocery store, rather than a fruit and vegetable business. But the chips were so fresh and crunchy that I started buying them at the produce place.

Pilot customers lead to paying customers. My company, ABC Signup, wouldn't exist if it weren't for a pilot customer, which not only helped us line up our first paying customers, but soon became a paying customer itself. More on that next time.

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