The Internet, free? Well, not any more.
Disney’s Blast, established some four years ago, was a pioneer in charging users for site services. Yahoo recently announced that it would charge a small fee for the use of its online auction service (up to $4 per item traded). AOL Time Warner’s voice portal is following the same trend and so are most of the world’s “free” Internet service provider (ISP) concepts.
Why? Because advertising revenue is decreasing, as is investor and shareholder faith in the performance of many dot-coms. The result is a return to what is possibly the commercial world’s most tested and used revenue-earning model: The consumer pays.
Until recently, this basic commercial precept seemed inapplicable in the new economy. But the new economy has had to dramatically change its direction. Not surprisingly, we’re being forced to comprehend a fundamental and increasingly self-evident fact: Free services are inevitably doomed (unless they represent some outstandingly clever business). So how will the loss of free service affect online consumers’ relationships with Web sites and their favorite online brands?
First of all, payment creates short-term commitment. If you decide to pay a $4.95 monthly subscription fee, you’re probably indicating some level of commitment to the service. I bet we’re all familiar with the feeling: If you pay for something, you’re more aware and careful of it. The item or service becomes an acquisition, something you’ve bought following monetary and other considerations. If you buy even a cheap pen, you’re less likely to lose it than all those other pens you manage to collect by accident.
The apparent “loyalty” I’m describing — the sense of attachment the consumer has to an item in which he or she has invested money — is different from loyalty to a brand. But like brand loyalty, it is characterized by expectations. Brand loyalty is built on the high expectations consumers have of their favorite brands. Those expectations are formed by past experience; consumers know what their brand of choice can deliver. The loyalty of consumers toward purchases is also built on expectations, but these expectations are undefined as far as consumers are concerned. They basically expect to get some — any — sort of value from the product in return for their money!
But there’s another dimension to the loyalty I’m describing. What if the initial purchase satisfies the consumer enough that he or she repeats the purchase or returns to use a service again? Now the loyalty to the product or service isn’t simply an expression of short-term expectations.
If the product disappoints the user during that initial relationship, any potential of an ongoing financial relationship between the consumer and the seller of the product could be dashed. If the product fails to give the consumer value for the money, he or she will terminate the relationship in its nascent stages. A traditional brand relationship is built on consumer loyalty, which is expressed in consumer choice. Consumer choice, in turn, is prompted by the goodwill a brand earns through the consistent fulfillment of consumer expectation. And this is where the big test lies for the next generation of dot-com brands.
First, users will have to decide if they like the service at all. Then they’ll have to decide whether they’re willing to come back for more — whether they like it enough to expose themselves to hundreds of ads, the necessity of handing over private details, and all other byproducts of the loyalty development process. Whether the user even returns to a site once it has introduced the user-pays concept will depend on how good the site has been at nurturing an online brand relationship with its users.
More than 90 percent of e-tailers have died over the past two years according to Forrester’s autumn 2000 report. The big question is what will the dot-com mortality rate be as a result of the user-pays trend?
One thing’s for sure: You had better be careful. Ensure that your introduction of a fee doesn’t result in empty traffic reports and thousands of complaints.
Did you like this article? That’ll be $2.95, please.