The Freebie Issue Is A Symptom

Just The Facts

jack_webb_dragnetIt’s been fascinating for me to watch the “debate” about “freebies” rage back and forth within the SL Blogsphere. Unfortunately, there is little substantive evidence or facts being cited by either side.  Although a few would frame this debate in “socio-economic justice” terms, I believe most would agree that the center of this debate rests squarely within the realm of economics.

I’ve found almost all of those who are against freebies share one thing in common; they want/need to make money from their creations. The members of this group are diverse. Some are “starving students,” others are underemployed/unemployed persons trying to generate a second or even a first income, by leveraging skills that would require a degree, experience or mobility they don’t have, to make them employable in the “real world.” Many more are simply looking for ways to generate enough income to offset the cost of living as something other than a vagrant in SL.

There are many of these “Virtual Capitalists” who believe free / ultra-cheap items are a legitimate way to attract or reward customers. Yet I have never found a single one who could produce statistical evidence of the long-term positive impact freebies have on their sales volume or net profitability. The most common argument heard from this group in support of freebies is: “If I don’t give away free items, my prospects/customers will go to my competitors.”

We Love Freebies!

We Love Freebies!

My question to those who advocate giving away freebies to promote their brand or build customer loyalty is simple. If this strategy works so well, why don’t real world companies with hundreds of years of retail experience employ it as a standard retail business practice?  It can be argued there are some “free” RW items that show up, but rarely without the requirement for an additional purchase, membership or some other revenue generating component for the retailer.  Without hard data to back up their argument, those who promote freebies as a marketing tool, are likely doing so because of they either lack real world business experience or are allowing themselves to be driven more by peer pressure and competitive “lemmingism” than by a viable business plan based on a sound business model.

Those who advocate freebies as a way to “be nice to newbies” must either never have had children, now have spoiled children or live in France; the latter two conditions being “states” (pun intended) I have no desire to live in.  Other than the “stigma” of dressing in the limited wardrobe offered by the Linden library, a stigma many Lindens themselves seem immune to, what makes people think newbies need a plethora of free stuff or that giving them this stuff makes SL a better place?  Does it spur creativity or industry in new residents?  Does it encourage them to register a payment method and invest further in the economy?  Once again, when asked these questions, the proponents of freebies seem unable to produce any facts to support their position.

Augmentation v. Immersion

My observations are that the membership of the groups holding the two primary pro & con opinions, seem to closely parallel another two sets of user profiles; the immersionists / escapists and the augmentists. For those unfamiliar with these terms, as they apply to SL, I encourage you to read one of the original and IMNSHO best discussions of this called Augmentation vs. Immersion.

I admit my own involvement and focus in Virtual Worlds is that of an Augmentist. I have and will continue to participate in quasi-imersionist activities, such as flying, surfing, skydiving, etc., but my primary focus is the pursuit of ways to use the Virtual World environment as a business (money making) tool.

Unlike those interested in augmenting their incomes, many Immersionists in this debate have no financial interests/needs whatsoever.  Most are stay-at-home parents with spouses paying the bills, academics with universities paying the bills, the socially challenged and retirees.  They are more than willing to spend money & time buying, creating and blogging about virtual goods, to help them pass the time or generate a virtual sense of self worth, by making them feel young, attractive, sexy, important, etc.

Interestingly enough, both augmentists and immersionists who promote freebies have one thing in common, their primary reason for giving away free items is to draw attention to themselves.  Unlike the questionable value of this as a business practice, there is no question that it does work as a social attention getter.  Want proof?  Look at the number of blog posts, Plurks and Tweets that are devoted to the latest freebie or freebie hunt.

Linden Lab’s Role

free-second-life-accountNo objective discussion of freebies is complete without examining Linden Lab’s role in the debate.  Fortunately or unfortunately, depending on your perspective, I believe the debate about freebies is inexorably tied to the presence of unlimited “free” user accounts.

Free accounts multiplied by freebies are the formula for problems.  First, it creates an expectation that people can participate in the Second Life community without materially contributing to it.  Second, “free” account inventories, stuffed with thousands of freebies, generate performance overhead and degradation that depreciates the SL experience for everyone.

Paid accounts, that included a reasonable $L stipend, would help resolve the freebie issue in two ways.  They would create an immediate sense of vesting in the community, while the stipend would provide a compelling incentive to spend the included Lindens on any of the thousands of items resellers have to offer.

Does all this sound familiar?  Well, it should.  Linden Lab already offers Premium Memberships.  Oddly enough they are only “promoted” as a tool for “enhanced” technical support and a requirement for buying mainland property.  Most people, including myself see little value in them.

The argument that “free” accounts are necessary for people who “can’t afford” a paid account is specious.  To use SL requires a fast computer and a broadband connection.  People who have access to these things generally have at least some disposable income.  Even the poorest student manages to come up with money for beer, movies, Starbucks, more beer, etc.

15 Responses to “The Freebie Issue Is A Symptom”

  1. Gabby McCullough Says:

    You said: “If this strategy works so well, why don’t real world companies with hundreds of years of retail experience employ it as a standard retail business practice?”

    One of the things I don’t think you have taken into account here, is that in the real world, if you are buying a clothing item you get to try them on. That is very rarely available in SL.
    Freebies are a way to show the quality of your items, and a way for a consumer to try your item before dropping a bunch of linden on something that may not be up to their quality standards.

    I blog freebies, and am feeling quite battered by the bad rap freebies are getting. I have found so many stores I would never have heard about, because they put out a quality freebie and it got blogged.

    Are freebies sometimes overdone? Yes, I will concede to that point. Do qualities freebies (samples) have a place and are they valuble? Yes, I think they do, and they are.

  2. Rosie Shark Says:

    “Without hard data to back up their argument, those who promote freebies as a marketing tool, are likely doing so because of they either lack real world business experience or are allowing themselves to be driven more by peer pressure and competitive “lemmingism” than by a viable business plan based on a sound business model.”

    I think as we’ve seen countless times, that commerce in SL is often times one individual person with something to create/sell, consumers, and friends. Though I totally agree with more of a need for a sound business plan that is built on a successful business model, for alot of people it’s about the community they thrive in and the individual aspect that you really can’t get from a rw corporation/business. Apples and oranges alot of times for the individual creator.

  3. Well, your article illustrates one of the key problems with so many people who write opinion articles. Those who are in your group (Augmentist) are the norm and are not described at all as you see them as the default player. Those who are in other group are described and pejoratively – as socially challenged loners seeing self-actualization in a a virtual world. Yet there is no reason, no data, no actual facts other than your own bias, the idea that your way is healthy and normative and the other is a bit sad and pitiful. It’s that tendency to stigmatize those unlike us that makes the world and SL an unhappy place.

    I have no idea whether I am an immersionist or an augmentist and don’t really care. I am somewhat ambivalent on the whole freebie debate. What I am, though, is sick and tired of op-eds written by people who write in stark terms that malign and demean people who are not like them. It’s unnecessary and weakens your argument because your biases trump reason.

  4. Amanda Shinji Says:

    Well, you asked why RL companies don’t give away stuff? Simple answer is, they do! Obviously, what with you being a bloke, you don’t buy makeup, skin cleansers etc. but cosmetics companies are always throwing free stuff at me because I buy their products. Granted, I have to spend £XX to qualify for the free items, but thats not usually much, if anything, above my usual spend for their particular cosmetics, so yeah, I get free stuff just for buying what I’d normally buy.

    Okies, before you cry “Oh, but it’s not the same, you have to spend money to get free stuff”, I know this, but it’s still freebies from RL companies, the same as samplers are freebies.

    SL designers make freebie ‘samplers’ so that potential customers can see if the designer’s style matches their ideals… If it doesn’t, no harm and no foul, but if it does, then the sampler leads to sales and sales means cash.

    I’m not for or against freebies really, I don’t go out of my way to camp for an item, I don’t join a group JUST to get their freebies, if i like it and it’s free then i’ll grab one, but i’m not going to grab it just because it doesn’t cost me anything… I don’t get the attitudes of those who complain about an item they’ve not paid for. Okies, so you don’t like it, STFU, you didn’t pay anything for it. As for the designers who are stopping making freebies, fair play to them, but i do think that they’re sort of limiting future potential sales, IF their work is up to scratch and people want to buy it…

    However, I may be wrong… ;)

  5. Second Life items are digital content, like say, music? But yeah, real world companies don’t give away complimentary stuff and services like Youtube, Spotify and Myspace do not exist.

    Next!

    • I really don’t mind the freebies, but designers hardly ever give out items that would compare to their top designs, kind of like giving you a bargain bin item.
      I have giving out items to group members, as a way of saying thanks. Have been debating on marking all of my landscaping plants down to 10L’s. I can’t afford 15,000 L’s in the classifies every week, just to stay up with other landscaping companies. Is it worth upsetting my competitors? Heck! who cares, think I will!!

      • Heidi Halberstadt Says:

        You couldn’t be more wrong. Yes, there are designers out there who give away inferior quality items, but if you would look around more you would see that the quality an unbelievable amount of freebies has skyrocketed. Which, incidentally, is also used as an argument against freebies – why pay if I can have a free item with outstanding quality?

        If you need to see what I’m talking about, contact me in-world and I would be more than happy to show you a few freebies that’ll knock your socks off.

  6. RL companies do give out freebies in the form of samples and demo versions of items in order to entice a sale. With software and Internet based companies it is only more common. At their best the freebie in SL should work as an enticement to gaining a paying customer interested in what you have to offer. Sometimes it works sometimes it doesn’t. Same for freebies for new players, give them a taste of whats available and hope they step up to buying lindens and being selective about what they purchase. The dissatisfaction of those that choose to “go free” and only have access to freebies shouldn’t surprise anyone.

    The ability to “own” mainland rather than rent, enhanced tech support, and a laughable stipend are not worth it for the average player to get a paid account. You contribute much more to the SL economy by buying lindens with the $9.95US monthly paid account costs. I only have a paid account for the enhanced tech support for when something goes wrong with one of our islands, I don’t even need a paid account to “own” them. So demonizing free accounts seems a bit off the mark.

    Freebies are a legitimate marketing tool that can benefit a business or backfire on it. Freebies are a non issue, turned into an issue by a “vocal minority” of frustrated freebie shopaholics and failing business owners looking for a scape goat.

  7. I’m not sure what the freebie issue actually is.

    However, if you’ve worked in a position with any purchasing authority, AFK, people are trying to give you freebies all the time. Briefcases, handbags, cartons of whiskey, laptops, branded mouse-mats, branded notepaper…. You name it.

    Microsoft sent me a copy of Rallisports that I’ve never taken the plastic off of, a combination padlock that a 2 year old could open in four seconds, a desk fan, a cup-holder, and a folding paper hat — all on the same day.

    I just got back from the mall and there’s a dozen people handing out assorted minor freebies.

    • As a consultant, company owner and elected official, I’m used to being offered items at no cost. Frankly, I’ve always refused free “gifts,” including “free” cups of coffee at the local diner, because I want to be 100% unbiased / ethical in my dealings.

      There IS a difference between businesses distributing sample-size quantities of cosmetics and the freebies distributed in SL. As you pointed out, these are “minor freebies.” We don’t go to the mall and have vendors offer us pairs of jeans, suits, etc. for Zero Dollars.

      • Maybe, if the production costs were similar, that is exactly what we’d see.

        I know what you mean about turning down free gifts. I won’t even accept review copies of things. If I didn’t pay for it with my own limited funds, why should anyone else bother?

  8. I see you’re advocating for Linden Lab cancelling free accounts. Ok. Even if _all_ different virtual realities – of which Second Life is one, but far from the only one – were basically paid, I think people would be more inclined to set up their own, like Open Sim. The technology would grow faster. People owning servers would grant space to friends and family. We would have free accounts again.
    You say people who don’t pay free ride on those who pay. Perhaps. It needs to be proven, but it might be that in certain cases, in certain amount, free riding is good for economy.
    So, well Linden Lab _is_ promoting freebies, giving away one themselves. Is it bad for their business? Maybe ask them? I’d be interested.

  9. RL companies do this all the time – SWAG, contests, etc etc. It’s a proven way of getting some traffic and sales. KFC free grilled chicken day ? Where did I get this Sun T-shirt? If no one ever tries your stuff, no one is going to buy it.

  10. Christine Svenska Says:

    Hi Valiant
    Long time no see how are you doing?
    I have to beg to differ with you here on a good many issues but I will only address a few.
    You are making some pretty broad assumptions.

    You say:
    “There are many of these “Virtual Capitalists” who believe free / ultra-cheap items are a legitimate way to attract or reward customers. Yet I have never found a single one who could produce statistical evidence of the long-term positive impact freebies have on their sales volume or net profitability.”

    Well, how many of us have you asked? Actually I do; with the use of spreadsheets and a few graphs and other little aids, track the success (and failure) of my marketing methods. It is not a perfect system nor totally scientific- yet. I started doing it casually but have lately been taking a far more serious look at my figures and methods and I do believe it is giving me a fairly decent overview of how various promotions help my sales.

    I am not going to talk in depth about my personal RL publicly in a blog comment but lets just say …I am not a novice to business by any means especially in the creative arts field and have been and still am very successful in that field in RL for more years than i care to admit, so I am far from business naieve. What works in RL doesn’t necessarily always apply to SL but here IS one rule of business that applies in both worlds – the big one – people cannot buy what they do not know exists and that is what marketing and advertising are all about.

    I am not in SL to make a RL living- at least not at this point, but I would like to break even and find myself even more driven to do so as the current economy has gotten a little pinchy for me as with many people. Actually I didn’t even come to SL with that in mind, not the first time I was here in 2004 nor now after a fairly long absence when RL just was too crazy to play. There are so many more things I want to do creatively in SL – I have been a bit lazy up to now and have barely scratched the surface of where I want to go creatively. What I want to do involves paying the tier on my sims and hopefully even expanding on them soI really need to support this. Also looking at the other virtual worlds for creative possibilitues but SL is enough to handle right now. So… in December I closed that time consuming (though at times fun) money pit of a club, tightened up my bootlaces got a little more serious and delved into finally opening my shops.

    In SL as well as RL but even more so in SL “If you build it they will come” does NOT apply. So I started looking at every means of advertising. We do not have the conventional RL means of television, radio and newspapers. Yes we have equivelents but in talking to many, many SL residents I became aware that an incredible amount of them do not know about SLTV, only listen to non commercial radio within SL (ie. DJ’s in clubs) and don’t pay much attention to commercals if they do hear them, and the majority do not discover blogs and virtual magazines until they have been in SL a good while. And that is understandable. When you are totally new here there is a heck of a lot to absorb. The first thing they seem to discover besides one on one freindships is groups. As their social circles and networking broadens they discover other things. It seems that my circle of friends include a lot of die hard shoppers LOL so input wise that is an advantage. I take every opportunity in hopefully non obtrusive ways to talk and listen to people especially my customers to get a drift of what they might like to see in thier SL’s.

    I keep visitor logs of all my shops. I have a regular group left over from the club and recently got a subscibe-o-matic. I run promotions, sales, offer freebies, dollarbies, do hunts, Midnight Mania and Lucky chairs. I compare my visitor logs, group lists and transactions against each other. I look at surges in buying, repeat customers, new customers etc. I make little graphs and note as I try different things to see if I can see trends – and yes patterns do emerge. I actually have found it fascinating.

    I also advertise in groups, Fash Con, etc. and compare the effect on sales each has. I compare the visitor logs from my outlying shops to those of my main stores and then against transactions to see which branch shops are productive and remove those that show no advantage. I think of how I liked to shop (when I still had time to shop) and how I liked to TP to the main store from the smaller ones in hopes of more of a selection from a designer that caught my eye. I use Xstreet. I started a blog, now do Twitter and am looking into and leave myself open to other avenues. There are times when I get frustrated, I am doing this all myself at the moment, the marketing really cuts into time I would rather use to create because I want to take that a LOT farther, but it is all a part of growing a business and bread and butter money for paying tier. Maybe it is not a part of growing what you do, Valiant, in SL but it is very much a part of the SL fashion business. (OMG this is starting to sound like RL work..hmmm LOL)

    I have a lot of SL friends and aquaintences that are merchants as well, mostly in the fashion business. We do share ideas and we do talk to each other. And believe me, I am not the only one by far that is paying attention to the methods for our madness.

    “Without hard data to back up their argument, those who promote freebies as a marketing tool, are likely doing so because of they either lack real world business experience or are allowing themselves to be driven more by peer pressure and competitive “lemmingism” than by a viable business plan based on a sound business model.”

    I HAVE hard data. Freebies and all the other marketing straegies do work. Some better than others but they all work. They get your product out there and get people into your stores. Do I really like these marketing methods? Not all of them believe me – I tried doing it without but very quickly learned that you cannot get anywhere without promoting your product – sort of like RL eh? Does everyone that hits you for a freebie, MM or the chairs become a “shopper’? No, of course not. But I have to say that enough do because my sales are growing and growing well. And Valiant, “Lemmingism”? Um, look at advertising in RL – talk about lemmingism! (god save me from the infomercial! and even from commercials! Save me from TV! LOL and lets not even talk about junk snail mail and junk email) I have no clue what your RL field is and I really don’t care or need to know but as far as freebies in the RL world? Ever been to an international trade show? I’ve been to more than I care to think about and have participated in same. Samples, perks, by any other name – freebies, taking clients and suppliers out for a night on the town, business dinners..etc,etc….freebies.

    “As a consultant, company owner and elected official, I’m used to being offered items at no cost. Frankly, I’ve always refused free “gifts,” including “free” cups of coffee at the local diner, because I want to be 100% unbiased / ethical in my dealings.”

    Yes, in some RL business arenas it is inappropriate to “gift” Most especially if you are an elected official. But this is definitely not true in all. In some fields it is common and actually expected. In dealing with some of our multinational suppliers and customers we would have definitely lost business and been considered rude to not give or accept hospitality. It is the nature of the beast.

    Product research studies, marketing research studies – in many and dare I say most depending of course on the product, involves people trying out the product and usually involves (drumroll)….freebies! On the most basic level – walk through any of those warehouse club type stores on certain days in RL and have lunch – free…freebies! Yes, Valient… in the REAL world.

    In ladies RL retail most shops offer customer incentives. One of my favorite shops gives you a nice little discount card once you have spent $500 USD (not hard to do believe me LOL) and from then on sends you regular very generous discount offers and has even sent me birthday gifts and the local store where I normally shop called me up on Mothers Day because they had a gift for me. And it was a very nice gift! I have also had some very nice gifts given to me in appreciation from little boutiques I like to frequent. As Amanda pointed out …

    “Well, you asked why RL companies don’t give away stuff? Simple answer is, they do! Obviously, what with you being a bloke, you don’t buy makeup, skin cleansers etc. but cosmetics companies are always throwing free stuff at me because I buy their products.”

    Exactly, the RL fashion world does a ton of freebie and discount promotion because they know their target. It’s not all teeny little samples we get either. I know some companies that give out very nice full sized product.

    All in all unfortunately tho Valiant, I have to agree with Cajsa. “I have no idea whether I am an immersionist or an augmentist and don’t really care. I am somewhat ambivalent on the whole freebie debate. What I am, though, is sick and tired of op-eds written by people who write in stark terms that malign and demean people who are not like them. It’s unnecessary and weakens your argument because your biases trump reason.”

    There are days I suppose I am an immersionist and some other days an augmentist – actually it may vary hour to hour some days it’s all business – some days its tossing penguins..LOL, I wouldn’t care one way or the other about freebies if I didn’t have a shop. Before I did I was lucky to be able to afford to pretty much buy what I liked but I really have enjoyed some of the free items I collected along the way of my exploring and shopping in SL.

    I’ve never been one for labeling people in that way or at all if I can help it. But by the tone of your post it seems you are all about labels. For you to make the assumptions and broad statements you have made here I feel is very unfair and prejudiced. Some of the statements you have made, well I am not going to even address them. I try to be respectful of other’s opinions. But can you tell me Valiant where you get the hard data to support what you claim? If you are doing a survey and study of the socio-economic groups or level of experience/education as relates to SL business and participation, send me your questionnaire please I would love participate and to hear all about your end research results. Bring on the graphs and the spread sheets please.

    Maybe freebies and the methods used by the fashion community do not work for your particular SL business but it seems to work for ours. Even the oldest shops in SL hand out customer appreciation awards from time to time to keep up interest.

    You say “I admit my own involvement and focus in Virtual Worlds is that of an Augmentist. I have and will continue to participate in quasi-imersionist activities, such as flying, surfing, skydiving, etc., but my primary focus is the pursuit of ways to use the Virtual World environment as a business (money making) tool.”

    It’s your world, your imagination Valiant and if that is how you choose to spend your SL time I totally respect that, I am fascinated by the seemingly infinite ways people approach and “live” and visit in this world.

    Valiant, I would respect your opinion a lot more if you were a tad more tolerant. I think it somewhat sad and disappointing that you seem to look down on others that do not share your vision or opinions. Isn’t that as bad as how non SL participants sometimes lump us all? We are all dyed-in-the wool pasty, sex crazed or deprived trekkie geeks (ok I like star trek, is that so bad? LOL). So… Valiant, which trek uniform do you have in your closet and do you wear it with or without your pocket protector? And when is the last time you saw the sun? You have an SL account that must describe you right? Cruel eh?

    It is not your argument I take exception to, nor your opinion though I do not agree with you. And any valid points you have made at least for me ..have…sigh…been lost in the tone of your “voice”. I find it interesting that you say “because I want to be 100% unbiased”. Boy now i am confused.

    I admit, yes freebies and hunts are somewhat out of hand and maybe (uh yeah, hangs head in shame , i get carried away) I have contributed to that craziness myself but it is working for me and it’s going to have to work for a while until I can think of something better. I am constantly re evaluating and experimenting and yup I do keep hard copy :)

    But hey, what do I know? I am just a silly little blond avie :) LOL

  11. Heidi Halberstadt Says:

    Why do you compare RL companies to SL companies? In SL you make one item and you have unlimited copies to give away with no further cost to you. Show me how to do that in RL and then we can start comparing. This is an argument against freebies that is more than feeble, it is completely flawed.

    As for LL not offering free accounts? I wouldn’t have an account now, and neither would I have ever bought L$ with US$, and I wouldn’t spend the amount I am spending in-world now, either. And yes, I could afford to buy L$, but not on a consistent basis, so an account that needs to be paid every month just wasn’t in my realm of possibilities – I bought Linden when I could.

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