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What is wrong with Free?

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Ok, maybe this is something you business/marketing types understand intrinsically... but it is something that I do not understand, so please bear with me. Why do people complain about getting something for free that used to require money? I thought people like getting something for nothing.

For example, Microsoft recently announced that Virtual PC 2004 will be available free of charge. I expected users to be happy to get yet more quality software for free... but I did not expect the firestorm of complaint from users on newsgroups that fall along this line of logic:

Gosh, I feel like a used dummy for paying Microsoft $X for Virtual PC 2004 Y months ago. Either

  • Microsoft is stealing money from me
  • I am simply lining Microsoft's profits without even an acknowledgement

These users either want:

  • Microsoft to give compensation, either in the form of money-back or money voucher, for people who purchased Virtual PC 2004 in the last Y months
  • To pirate other Microsoft software to "get back" at Microsoft because it extorted money on eventually free software and who knows, it may be released for free in the future.

I simply do not understand the rationale for this line of logic. Software is not your possession; you purchase a license to give yourself the right to use that software.

If I purchase a possession and the seller later decides to give the item away for free, then sure I will be bummed because it means I cannot later resell that possession. I am cheated from being able to resell that possession because the sellar has deflated the market price for that item. However, regardless of price, I still get my utility and value from using the item - it functions the same whether it is priced at something or nothing.

If I merely purchase the RIGHT to use an item and the seller later decides to give the item away for free, then how can I be cheated? Since I never owned the item, I am not cheated from being able to resell the item because I could not sell the rights to it in the first place. However, I still get my utility and value from using the item regardless of price.

So, I do not think there is any stealing going on. Instead, I think there is a natural sense of Buyer's Remorse. Why one thinks that s/he is magically entitled to compensation for feeling remorseful... I do not know.

I mean... no one pointed a gun at you or otherwise extorted you to purchase an item Y months ago for $X. You willingly purchased the item because you believed its utility is worth at least $X at that time. Just because its price is now free does not diminish its utility - you are not investing in something you don't own; the binary files didn't change; the software doesn't phone home and alter behavior, did it? And since you did not own it in the first place... what's changed?

Are you upset that Joe Schmoe now gets the software for free while you had to pay for it? But what about those Y months when you had utility of the tool but Joe did not; was the price not worth it? But if it was not worth it, then why did you purchase it in the first place? Oh, you thought that Y was going to be a long period of time to amortize the initial cost... but who gives assurance of that assumption?

I sense the same analogy in computer hardware. It seems like every year the hard drives double in capacity at the same price point. Do I complain to the hard drive manufacturers that I am simply lining their profits this year and that they are stealing money from me because next year they will charge me half the price for the same item? Or that they should just give me the discounted price now or give me cash back/voucher towards the future purchase of a hard drive? Or that I should steal an identically sized hard drive every year because it halves in price?

Nope... I take comfort in the fact that when I purchase a hard drive, I do so at a reasonable price point at that time, and the utility of having that drive for a year is worth any depreciation in price. Looking back and feeling remorseful is only going to be upsetting because most things tend to get cheaper/faster/better as time goes on. I just accept it and move on.

So... can anyone explain to me why Buyer's Remorse deserves compensation, or that Microsoft is somehow stealing by giving away software for free? Because as far as I see, Microsoft is far from stealing - it is simply not making money it can otherwise make. Maybe there are subtle points that I do not understand; feel free to kindly enlighten me. :-)

//David

Comments

  • Anonymous
    July 28, 2006
    The comment has been removed
  • Anonymous
    July 28, 2006
    "Oh, you thought that Y was going to be a long period of time to amortize the initial cost... but who gives assurance of that assumption?"

    The attidude of this part of your commentary seems to be saying

    "Why pay for any Microsoft software because you can't be sure that your ROI will hold - they keep giving stuff away for free after charging for it. You should always wait until the very last minute to make your purchase because at any time Microsoft may give it to you for free."

    This doesn't sound like the attitude you want to put into your customer's heads. Surely you want them to part with their money as soon as they see the need for the software and the moment the ROI works for them.

    Don't make them feel like they should always wait for as long as possible. By the time they've done that they may decide they can manage without.

    (To start with I'd written a load of guff about the economics of this, but you clearly understand this so I thought better of rehashing it.)
  • Anonymous
    July 30, 2006
    Nice article. I enjoyed the analogies you've provided.
  • Anonymous
    August 01, 2006
    Kirit - I agree with what you are saying... though still do not see anything wrong with giving stuff away for free after charging for it.

    Customers should be free to wait as long as they want. They just have to realize the costs associated with waiting:
    1. The product cost may never decrease, so waiting just prevents utilization of a product that may be valuable to the customer
    2. Product Support period is shortened. Microsoft's product support policy is basically 10 years following product is shipped and NOT when you decide to install it.

    In other words, a savvy business customer who values predictability would likely not wait until the very last minute because that is a gamble. Is the decrease in acquisition cost worth the lost opportunity cost of waiting and the decreased value of support?

    As long as the customer understands the product's future price is a gamble and not a guarantee, I do not mind what the customer does. If they can manage without it, then good for them; I am not thrilled to sell someone something they do not need. But then again, that's why I am not in marketing or finance. :-)

    //David
  • Anonymous
    August 01, 2006
    The comment has been removed
  • Anonymous
    August 02, 2006
    I don't think you're seeing the business issue here.

    Let's assume that I want to buy some widgeting software. I know that software is going to be worth $500 over the next year to me and as Microsoft Widget is only $200 then I should buy it. Especially as I'm a proud widgeter and I know I can make better widgets with MS Widget than without it.

    My competitor on the otherhand, Cowboy Widgets, would also get $500 worth of value, but they don't like to pay anything so they'll carry on.

    If Microsoft turn around tomorrow and start to give it away for free then I've lost $300 over my competitor who will of course grab a copy for free the moment they can find a download link.

    If on the other hand Microsoft announce tomorrow that they will start to give it away in three months then I'm still worse off than my competitor, but I have three months to try to turn my better widgets into an improved position in the market because my widgets are better than my competitors.

    The problem here isn't so much that MS start giving it away, but more to do with the way that they do it and the time between taking one person's money and giving it away for free to somebody else.

    If you actually announce a future price reduction then what you see on your demand is that it drops between the announcement and the price reduction. This is because that your customers are working out the difference in the utility they get out of it versus the reduction in the price. Something similar happens when you announce a price increase.

    So long as you allow your customers to price up the utility for themselves they will stay happy. If you take that power away from them they will get upset. It isn't the fact that you're giving it away that's the problem, it's the fact that you're giving it away to other people and you never gave the buyers a chance to work out for themselves if it was worthwhile to buy then or later.

    My point is that you shouldn't be treating paying customers like that. And you certainly don't want to train paying customers to hold on to their money for as long as possible because they never know what you'll be giving away next and when you'll be doing it.
  • Anonymous
    August 02, 2006
    Kirit - thanks for the example... that's why I like Engineering. :-)

    Your point of "so long as you allow your customers to price up the utility for themselves they will stay happy" makes a lot of sense to me.

    I guess I tend to price the current utility and see if it passes my needs; worrying about future price and utility has its own uncertainties that I do not want.

    If I understand your points correctl - what you are saying is that if Microsoft wants to keep its users happy, it should pre-announce the price reductions for Virtual PC and Virtual Server for say, X months, to allow customers the ability to price up the utility.

    My guess is that in this instance, it would stifle Virtual PC/Server adoption for those X months while people wait and Microsoft risks losing those customers to VMWare, which would have greater costs than the costs of an unexpected price change.

    So, I guess it is nice that Microsoft has already pre-announced that the next version, Virtual PC 2007, would be free.

    //David
  • Anonymous
    September 18, 2006
    Hi David, I sent this message to IIS newsgroup but didn't get response, so I am here seeking your faithful help:)


    I am using logman to trace the performance problem of my IIS 6.0 on two web servers and get problem on one server.

    Running "logman start "IIS Trace" -pf iistrace.guid -ct perf -o iis.etl
    -ets" with the same iistrace.guid file.

    Seems all providers start fine as there is no error message

    But I always get 0 on the ASP performance data out of one perticular server A. Data from server B is fine (e.g. ASP performance data is not zeroes 000000)

    The two servers are in a cluster both with active users (aspx .net
    application), so there must be something wrong with the result of trace in server A.


    Any ideas appreciated, thanks a lot!


    HTTP Response Time Statistics (server A)
    --------------------------------------------------------------------------------

    Request Type Requests/sec Response Time(ms) IIS% Filter% ISAPI% ASP% CGI%
    Static HTTP (cached) 0.134 0.02 100.0 0.0 0.0 0.0 0.0
    ASP 0.000 0.00 0.0 0.0 0.0 0.0 0.0 (***has no valid data at all!!!!!)
    Static HTTP 0.000 0.00 0.0 0.0 0.0 0.0 0.0
    CGI 0.000 0.00 0.0 0.0 0.0 0.0 0.0


    HTTP Requests CPU Usage Statistics (server A)
    --------------------------------------------------------------------------------

    Request Type Requests/sec CPU% IIS% Filter% ISAPI% ASP% CGI%
    Static HTTP (cached) 0.134 0.0 100.0 0.0 0.0 0.0 0.0
    ASP 0.000 0.0 0.0 0.0 0.0 0.0 0.0




    HTTP Response Time Statistics (server B)
    --------------------------------------------------------------------------------

    Request Type Requests/sec Response Time(ms) IIS% Filter% ISAPI% ASP% CGI%
    Static HTTP (cached) 1.442 0.02 100.0 0.0 0.0 0.0 0.0
    ASP 0.323 606.20 2.1 0.0 97.8 0.0 0.0 (Has some data here!!!!)
    Static HTTP 0.085 0.68 99.2 0.7 0.0 0.0 0.0
    CGI 0.000 0.00 0.0 0.0 0.0 0.0 0.0
    Error 0.071 0.38 98.6 1.4 0.0 0.0 0.0

    HTTP Requests CPU Usage Statistics (server B)
    --------------------------------------------------------------------------------

    Request Type Requests/sec CPU% IIS% Filter% ISAPI% ASP% CGI%
    Static HTTP (cached) 1.442 0.0 100.0 0.0 0.0 0.0 0.0
    ASP 0.323 0.0 33.3 33.3 33.3 0.0 0.0
    Static HTTP 0.085 0.0 100.0 0.0 0.0 0.0 0.0
    CGI 0.000 0.0 0.0 0.0 0.0 0.0 0.0
    Error 0.071 0.0 50.0 50.0 0.0 0.0 0.0



    CONTENT of iistrace.guid:

    {1fbecc45-c060-4e7c-8a0e-0dbd6116181b} 0 5 IIS: SSL Filter
    {3a2a4e84-4c21-4981-ae10-3fda0d9b0f83} 0 5 IIS: WWW Server
    {06b94d9a-b15e-456e-a4ef-37c984a2cb4b} 0 5 IIS: Active Server Pages (ASP)
    {dd5ef90a-6398-47a4-ad34-4dcecdef795f} 0 5 Universal Listener Trace
    {a1c2040e-8840-4c31-ba11-9871031a19ea} 0 5 IIS: WWW ISAPI Extension