Tuesday, August 21, 2018

Beware Vendors Bearing "Free" Product

As a boy, one of my favorite novels was Robert Heinlein's The Moon is a Harsh Mistress, the great libertarian science fiction novel that popularized the phrase "TANSTAAFL!"

There Ain't No Such Thing As A Free Lunch.

No, no there isn't. Not on the moon and not for corporate information services Earthlings either. 

So when your vendors come promising "free" seats, product enhancements or additional services, keep this phrase in mind. 

In a post yesterday I cautioned against adding group subscriptions that overstate the ROI of a resource.

But what about the opposite: the vendor is offering you free seats  above and beyond what you initially subscribed to.

What's not to like here? Plenty. 

Let's take a hypothetical example. 

You subscribe to Horizon Research at a cost of $100,000 per year for 10 seats.  You have buy-in from the departments who plan on using the product, US and UK Sales. Each department is taking 5 seats, at $10,000 per seat. 

Budget for Horizon Research:

UK Sales: $50,000
US Sales: $50,000

Over the course of the year, Horizon offers you 5 more seats for people who've been asking for access. Horizon points out that several users have been sharing passwords, and they'd be happy to add a few seats to the new users.

You say fine. You're now getting 15 seats for the cost 10. The new users start using Horizon, integrating their data into their field manuals and sales forecasting models. They love it. 

Then renewal comes around. Horizon quotes you $150,000 for 15 users. Since Horizon knows how valuable the service is, they aren't budging on price, and aren't given you a volume discount. The Sales orgs haven't budgeted for a 50% price increase; you had told them they'd be looking at 5-8% max. You've got angry sales planners who've built workflows around a service they're going to lose. 


Takeaway: Manage demand carefully. Sometimes you need to say no to free stuff. Price regulates demand: when you offer something for free, demand is limitless. 


- Kevan Huston

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