Why ‘free’ will eventually cost you

Remember the days when free really was free? When reading a news article to the end didn’t mean having to get over, around or through a paywall. Or when loyalty schemes actually rewarded loyalty with decent rewards, not “spend $200 get a $20 reward voucher that can only be spent with us”.

The recent suggestion by Australia Post that letter delivery should be slowed unless Australians pay for a “priority service” is the latest signal that what has been considered free or “regular” can easily be bumped up by marketers to “premium”, with the associated cost.

Marketing is changing in response to a new world order in markets. The era of the liquid and dynamic market, as Coke calls it, is here. Markets move quickly. Getting a competitive advantage is becoming more difficult, but so is sustaining old business models that are unable and too rigid to keep up with the pace of change.

Banks were among the first to feel these forces. Online competitors, globalisation and more open competition forced them to move us firstly away from tellers to ATMs, then to the internet and now of course to mobile devices where the cost of a transaction to the brand is in the range of a few cents. Credit card rewards became harder and harder to get and the three tier system was replaced with five tiers – low-fee no rewards, low-rate with rewards, silver rewards/low rate, gold rewards/low rate, platinum, and WOW, you have that card!

Airlines had the same dilemma. In the face of smarter competitors entering the market with deeper pockets (just ask Qantas), they sought more agile strategies and different service offerings in a drive to change customer expectations and perceptions and raise new revenue while simultaneously reducing cost.

Enter premium economy. Cattle class made stylish. If the customer would like not to be elbowing or having their fellow passenger fall asleep on their shoulder they could pay just a little extra and fly in a bit more comfort. Or basically get the same experience they had before the introduction the 3-4-3 configuration, the bane of so many of us on long-haul flights. While it failed on the uptake, it did reinforce that if you wanted what you had before then you had to pay futuristic prices.

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