Free Is Not Inexpensive

Innovative startups, by definition, are introducing a change into the world.  And change is never easy.  While each startup’s market is unique, all will be seeking to induce potential customers to take a risk, and consider making a change from their current status quo. Yet while the trial may be “free” in terms of paying for the product, remember that even a “free trial” is never without some cost for a customer.

Lately, I have been thinking about what it takes to change. And what it takes to persuade others to explore changing because adopting an innovative product, by definition, requires change. Change from the way things were previously done.   

As startups introducing a presumably valuable innovation into the world, we often can convince ourselves, our investors, and our other stakeholders that the “better mousetrap” that we have invented has a value proposition that will win in the marketplace.  And, objectively, we can often layout a comparison table that shows how we can positively compare head-to-head against the closest competing alternatives to our product. We identify relevant dimensions to make our case by highlighting how our features are better, faster, and cheaper than the status quo and competing alternatives. However, while nearly always demanded by potential investors, this is often a pretty incomplete analysis when considering the mountains we must climb to engage potential customers and persuade them to change.

And, truly, it is only the potential customer’s point of view that defines the challenge we face in introducing change. Acknowledging that different products demand different degrees of change, I can confidently say that no change is cost-free. Even if a free trial is available, a potential customer must first discover that a solution to their “problem” is available, determine that the problem is worth the effort to actually solve it, incorporate the full scope of ancillary elements required to secure a complete solution, determine that whatever risks are involved do not overwhelm any potential benefit(s), and decide that the value delivered is sufficient to make the change from however the problem is currently being addressed (which can include not being addressed at all!).  Even if the trial is free, embracing change is not inexpensive!

Let’s consider a few examples of startups seeking to induce customers to invest in taking a chance.

• Yummy snacks made from cricket flour:  A few years ago, I was at a retreat for sustainability-focused startups. One of the other startups there was using cricket flour (yes, high-protein flour sustainably made from insects) to make snacks. Most of us participating were skeptical; however, we were a bit of a captive audience, so we listened and learned about cricket flour’s environmental and health benefits. And the snack tables were full of free samples. At first, I passed them by. Others tried them. The free samples persistently offered, plus positive reactions by my community, overcame my resistance, and I took a chance. I overcame my hesitancy and eventually tried every variety. Not bad. Not bad at all.  In fact, quite tasty. With a satisfying nutty flavor and crispy crunch. A partial win for the cricket snacks startup!  Unfortunately, my motivation for sustaining the planet was not enough for me to make a permanent change in my eating habits, and these snacks were not readily accessible in the places that I shopped when I went back home. As a consumer, comparable cost, appealing taste, health benefits, and sustainability benefits were not enough to overcome my ingrained habitual favorite snacks conveniently available in my neighborhood grocery store. The cost was too high for me to sustain the change, even though the free samples were quite appealing. 
  
  Lesson to consider: Remember how heavily peoples’ buying choices at home and professionally are influenced by habits, by the way their families, colleagues, communities trained them. Even if your product is demonstrably better, convincing enough customers to adopt a new habit is hard, expensive work for them.
  
  
• The risk of name brands:  I recently bought a new set of earbuds to replace my older ones that were failing. I investigated reviews and identified an option with 50% lower cost and some spectacular claims on battery life and sound quality. I also tried on my son-in-law’s AirPods. I came close to trying the ones that seemed technically superior, both better and cheaper. But, in the end, the risk was too significant. I could not convince myself that the company had an acceptable return policy and good customer service, and so I decided to opt for the security of Apple AirPods. Twice as expensive, with lesser opinions by the third-party reviewers; however, it felt lower risk. The company that almost had my business had not reduced the risk of taking the chance on a less well-established brand. 
  
  By the way, even in a business-to-business context, name brands can reduce risk. For example, at Fifth Eye, we made a similar calculus when choosing which cloud service vendor to use. We chose the market leader, AWS, because we knew that as we took our cloud-hosted software-as-a-medical device product to market, it would be one less uncertainty, one less risk for our potential customers to grapple with. We are already seeing that choice pay dividends as we talk to potential customers. When they ask how our product is hosted, and we answer, “On AWS,” the response is a nod of familiarity and relative comfort. In fact, one major health system stated outright that the fact that we had chosen to use the recognized market leader would make it easier to navigate the challenges of their cybersecurity police.
  
  Lesson to consider:  The power of name brands is often about reducing the risk and cost associated with choosing them. At least, in the beginning, startups are at the opposite end of the spectrum, so be prepared for the difficulties in competing with the perceived low-risk, name-brand option.
  
  
• Big risks require big potential rewards – and bold early adopters:  Like many startups, we are seeking to make potentially massive impacts on the industries we are targeting. These are the opportunities that can top a billion dollars in market potential that venture capitalists like to fund. However, that means there need to be big markets, including many potential customers with compelling evidence of the need for innovation and a willingness to pay.
  
  For example, FDA recently authorized us to sell our software-as-a-medical device clinical decision support software that helps detect hemodynamic instability (the signs of shock that emerge when a hospitalized patient is precipitously deteriorating) in time for doctors and nurses to take action to help the patient. For our earliest adopters, there is risk in being first to try a new way to manage patients, even a way that has been clinically validated and proven safe and effective before the FDA. For our pilot customers to begin to realize the benefits we offer requires clearing the cybersecurity gatekeepers, the legal bureaucracy, implementing that surveillance analytic in many units in the hospital to catch the relatively few but devastating unexpected deteriorations, integrating a new tool into clinical workflows (aka change). In other words, it is an expensive thing to try despite our efforts to reduce the risk and cost. To succeed, as a startup, we need to identify those earliest adopters who have the right combination of motivation and vision to strive for something better and take aim at the possibility of improving hospital operations and decisions in search of better results. We must articulate the opportunity for improvement and find those willing to strive for excellence by stopping the insanity of doing the same old things and expecting different (better) results. These are challenging enterprise-level sales because even trying the product requires strong motivation to overcome the hurdles. Yet, the potential of a “holy grail” type product entices the bold to try. And we seek to make that “try” as rewarding and low risk as we possibly can, while recognizing that, in some ways, the very challenge means that those who take the bold step are also the ones who can prove to be heroes to the hospitals they work for.
  
  Lesson to consider:  Big changes often demand big potential rewards to induce leaders to tackle the work and risk involved in making a systemic change to capture a substantial potential gain. These are some of the most rewarding opportunities, however, getting started with the earliest adopters is a challenge inherent in the nature and scale of the opportunity.