In his paper A Theory of Human Motivation, Abraham Maslow outlines how we think in relation to external and internal factors.
In the business world, there is a similar concept called the Customer Buying Hierarchy. The hierarchy is outlined as:
- Functionality
- Reliability
- Convenience
- Price
Interestingly, a few things come out of the theory.
- 1. When it comes to buying, price is the last thing that a consumer cares about
- 2. A product that is simple to use has more money earning potential
- 3. The lowest grade product is one that has lots of features that nobody uses. It’s unreliable, hard to use and expensive.
- 4. On the other hand, the ultimate product is free and does what the customers want in a reliable and easy to use manner.
What is an example of the ultimate product? Google search. In the online consumer world, none can compete with Google search in terms of functionality, reliability simplicity and price. Hence, if Google search is free, how can you possibly charge for your consumer product online?
This forces companies to focus on the online B2B market: creating values for other companies who are looking to buy what you offer. Examples of such companies are 37Signals, Campaign Manager, and Involver.
What are some innovative ways to charge consumers online? If more and more companies choose to ignore the consumer market, where will the innovation come from? Giant corporations only?
Free creates its own problems that stand in the way of innovation.
