One of my clients recently asked me whether she should charge for a series of tip sheets she created for families traveling with young children. Great question.

There's quite a bit of confusion around whether you should sell or give away your information products. About half the advice I hear favors giving information away for free. The other half favors charging.

The truth is, sometimes you should give information and resources away and sometimes you should sell them. The real question is when to charge and when not to.

In this article, I'll give you some guidelines around when to charge and when to give information away.

Start with What Your Business Needs Now

Asking where your business is at and what you need to be successful is a great place to begin.

Every business needs customers, right? So let's look at how strangers become customers. They go through three stages:

Stage One: Visibility (V)

To become a customer a person first needs to know your product exists. You become visible by getting your product and marketing message in front of people who fit your ideal customer description.

Stage Two: Credibility (C)

Knowing that your product exists is usually not enough to get someone to pay cold hard cash for it. Nope, they're thinking "well, that sounds good but how do I know it will really work?"

During the Credibility stage you need to give them information that demonstrates your product will deliver as promised.

Stage Three: Profitability (P)

Once your prospect is convinced that your product will, indeed, deliver the promised value, they will pay you and become a customer.

V to C to P = Marketing Funnel

Picture a funnel with lots of people coming in the widest part (visibility), a percentage sticking around to learn more (credibility), and a percentage of those who stick around becoming customers (profitability).

At any given time in the life of your business, there are people at different stages of becoming customers. Some are learning about you for the first time, some are  checking you out to decide whether they will buy, and some are deciding to buy and paying you.

Ideally, you have a steady stream of people constantly entering and moving through the funnel. If they don't enter or don't continue through, you have a problem and it shows up in your bottom line: You don't have enough paying customers.

When to Give Away and When to Charge

To decide whether or not to charge for an information product, I suggest you take a look at how many people are at each of the three stages.

Your goal is to use information products to help your prospects and customers to take the next step.

When You Need More Visibility

If you're just starting your business or you want to enter a new market, you probably need more visibility. You need people to know your product exists.

When visibility is your goal, I recommend you give something away that provides value and introduces people to your product or service.

Why? The goal for visibility is to answer the following questions:

1. What is it ("it" being your product or service)
2. Does it help someone like me?

You want to give something away that will answer these questions while asking for something minimal from the prospect.

A common example is offering a free Ezine subscription or a free report your prospects can download in exchange for their E-mail address or phone number.

When You Need More Credibility

Credibility is an issue when you're getting a lot of first time visitors and inquiries but not enough are coming back. 

For most products and services, people need repeated demonstrations of what you can do for them. They need to trust you.

When you are building credibility, I suggest you have two information products: one that is free and one that you sell.

1. A free product that allows you to build a relationship with your prospects. Products like Ezines are great because you get a chance to connect with customers once a month or more.
2. Product you charge for which offers a higher level of customer value. Ideally, this is a "no brainer" purchase. Something for which the value is so obvious for what you're charging that most people don't need to think too long or hard about whether to buy.

Although you will be making some money, the real purpose is to demonstrate credibility and build trust.

Warning: The biggest complaint I hear is when someone offers a free report or  one-hour teleclass that turns out to be little more than a sales pitch.

Again, you are creating value and building trust. Doing both will enable you to convert more prospects to paying customers when the opportunity presents itself.

A sneaky sales pitch will undermine the trust you are trying to build.

If You Need More Profitability

If you have a large, loyal base of readers, subscribers, or members who have been hanging out with you for several months and like what they're getting, some of them will want to invest some serious time and money for your focused time and attention.

For example, a consultant I know sends out a free monthly Ezine to her mailing list and sells low cost Tip Sheets, Checklists, and so on.

Each month 3-5 of her subscribers contact her to learn more about her workshops and seminars costing $500+. She usually books 6 to 8 engagements this way each year.

She explained it to me like this, "I try to provide something useful that my readers can apply right away. For example, I sell a $5.00 meeting organizer they can use to have more productive meetings. Sometimes this is all they need."

"But sometimes they're in a situation that goes way beyond the DIY stage. They need someone from outside the company to step in and help them set up a new system or to help them hire a new executive."

Allowing your prospects to upgrade (or escalate) and get a higher level of support is not only profitable, it's how you can really serve your clients.

Bottom Line

Whether or not to charge for your information products depends on what your business needs in terms of developing customer relationships.

The less known you are to people fitting your ideal customer profile, the more important it is to offer free or low cost information products which provide something of value.

As you build trust and as your prospects learn how you can help them, you can offer more expensive, higher commitment products for those who want (and can afford) them.

But there is a “dark-side” to referral marketing and if you’re committed to growing your business based on customer referrals, you need to be aware of potential problems that can occur.

True story: The (very) unhappy client.

Before founding Highly Contagious Marketing , I worked as a technical writer and trainer. Because I like computers and I like helping people use computers, it was and still is, work I enjoy and  that I’m pretty darn good at.

Like many technology experts, I worked awhile for a consulting company that would hire me as a contractor to handle projects requiring a technical writer or trainer. During this time I earned a reputation for doing quality work and doing it quickly.

One day, they offered me a project, that from their description, sounded fantastic: The client was in the Fortune 100, we would be developing a new training system that would be deployed in locations throughout the U.S., and I was the project leader with a staff of three. The client was very excited about working with us too because they were told that I was one of their best project leads and had never missed a deadline.

It was a complete mess from almost day one.

I could spend quite a bit of time recounting what went wrong but when you really got down to it, the conditions that helped me succeed in previous projects weren’t present in the current project. In the previous engagements, the client genuinely appreciated my presence, I worked directly with the project sponsor, and had free access to subject matter experts.

I discovered too late that the conditions that contributed to my previous successes were largely missing in my current situation. There was a power struggle between the project sponsor’s department and the project manager’s department, the subject matter experts resented our presence because they wanted to create the training system, and system desired by the client was far more extensive and complex than what could be completed in the allotted six months.

And that is a good example of a referral gone wrong.

The people who referred me were telling the truth: I had done a great job for them under a specific set of conditions. We assumed this project would the same and didn't do enough research to surface the issues that made the engagement such a struggle.

As a small business owner, have you ever gotten a referral who comes to you excited about working with you but once you begin working together, it feels like a constant struggle?

If you have, it's a very slippery slope indeed because:

• You worry that when word gets back to your referral source they will never refer anyone to you again
  

• You worry that your new, unhappy customer will tell everyone what a lousy job you did

• You are concerned that the time and effort spent dealing with your unhappy new customer will shortchange your loyal core customers.

And you should be worried because when it comes to word of mouth communications, people are ten times more likely to share a negative experience than a positive experience.

But, good news, you can handle these situations gracefully to neutralize unhappy feelings and to perhaps even create a win-win for you, your new customer, and your referral source.

Six Steps to Handling a Referral Gone Wrong

1. Assess what caused the problem

You need to objectively assess what caused the problem. More often than not, these problems occur because you and your customer didn’t fully discuss assumptions and expectations. What assumptions did you make that turned out to be incorrect? What expectations did your customer or client have that you didn’t know about or disregarded?

2. Fully own your part.

However unpleasant your customer or client may be, business relationships don’t exist in a vacuum. In some way, however small, you contributed to the current situation.

I’ve found the best way to handle these situations is rather than look for blame (a waste of time and energy in my opinion), own your assumptions, expectations, and behaviors that contributed to the problem.

3. Apologize.

If you fully own your part, apologizing is a lot easier because you’re no longer on the defense. When you’re off the defense, there’s simply nothing for your customer to react to. They may still be angry and disapointed but they will no longer see you as the advesary this opens up the opportunity for accord.

4. Offer redress if appropriate.

If part of your agreement included a guarantee, ask your client if they want to take you up on the guarantee. If you don’t offer a guarantee, you need to find out what

5. Tell your referral source what happened (without putting down the other party).

If you initiate the contact to share the news, you will be viewed by your referral source as honest and forthcoming. If they hear it from the person they referred, they will wonder why you didn't let them know and possibly assume it's even worse than it sounds. To get referrals, your referral sources must trust that you will do good work for the prospects they send you. They must feel confident that giving you referrals will make them look good. When they feel uncertain about your business, they will not risk their credibility by sending you referrals. 

That's why, however, uncomfortable it may feel, it's important that you be the bearer of the news. 

6. Use what you learned to refine your Ideal Referral Profile and share the profile with your referral sources.

I cannot place enough emphasis on the importance of educating your referrals sources about what an ideal referral is for your business. Doing so makes it infintely easier for referral sources to spot opportunities on your behalf, increases the odds of converting the referral to a satisfied customer, and…

…by explaining to your referral a ideal referral, you also explain why the one they sent you didn’t work out and helps them refine who they send you.

Do you have an ideal referral profile?

If you don’t have an ideal referral profile, consider taking our More Referrals NOW teleclass. You’ll learn all about ideal referral profiles, how to use them to get more customer referrals, and much, much more.

For more details about the class, go to http://www.judymurdoch.com/referralmarketing.htm . 

Sure enough, on YouTube.com, there was a 40-second video showing scenes from a typical day in the life of an enormous orange tabby cat. For your viewing pleasure you can watch kitty sitting on a chair, being carried a short distance by a human caretaker, lumbering up the stairs, eating, and sleeping. Accompanying the video was a rather strange, ominous soundtrack: perhaps anticipating the consequences should kitty fail to lose weight.

The video is remarkably popular. On YouTube.com the “world’s fattest cat” video has been viewed over 24,000 times in the last five months. On another video site, it’s been viewed over 128,000 times since it appeared in September, 2005.

To my knowledge there’s no multi-million dollar advertising campaign. No postcard mailings or infomercials. Nor have I seen the 40-pound cat on Oprah or on the Tonight Show. Despite this lack of marketing support, hundreds of thousands of people worldwide have watched this video.

This is a perfect example of a viral message. A message that people eagerly share through word of mouth and email. It is an organic phenomenom that occurs on its own with no outside manipulation.

If you own a small or mid-sized business, imagine the potential if your marketing message were viral. Perhaps you have even tried to create viral marketing by encouraging your customers and colleagues to spread the word but the results have been less than spectacular.

What is it about the 40-pound cat video that has made it so viral?

In a word, Novelty. Referral behavior (and sending an email telling your friends to watch a particular video is most definitely referral behavior) occurs because we want to look good to others. One way to look good is to tell people about something that we know they are not likely to have heard about or not known about before. Most people have never seen a picture of a 40+ pound cat, let alone a video of one that is lumbering up a flight a stairs.

This is not to suggest that you need to find a 40-pound cat or a 12 oz. Tea cup Chihuahua to encourage customers to get the word out. You do, however, need to have something distinctive enough about your products and services so that your customers get a chance to look good by telling others about you.

FOUR WAYS TO IMPROVE NOVELTY

1. Use extremes. The 40+ pound kitty is a perfect example of using an extreme to create novelty. As human beings, we have a natural fascination with extremes: the biggest pizza (12-square feet for $135), the smallest dog (a 6” Chihuahua), a man who ate 36 cockroaches in 1 minute, and so on. 

Your business extreme doesn’t need to be nearly so exotic. Novelty is relative to the frame of reference used by your customer. A liquor store can advertise the largest selection of champagne or the most extensive selection of sake within a “four-state region.” Another example is a dockside restaurant that bills itself as selling the “freshest fish anywhere unless you catch it yourself.”

2. Offer an extraordinary guarantee. Although they no longer use it, the “30-minutes or it’s free” guarantee made Dominos pizza a household name. It was an audacious claim that no other pizza delivery chain had made in such a wide-scale, public manner.

3. Limited Editions. You see limited editions in a variety of products including soft drinks (Coca Cola Black), apparel (Gap 1969), games (60-year commemorative Monopoly edition), and automobiles (2000 Vapor Blue VW Beetle). The cachet is that the item is produced for a limited time and then pulled off the market giving it a “one of a kind” collectible status.

4. Limited distribution. Luxury products and services have long used the strategy of exclusive distribution to create an aura of exclusivity. But more prosaic products have used limited distribution to their advantage as well. For example, until the mid-1980’s, Coors beer was only available west of the Mississippi. If you lived east of the Mississippi, Coors beer was something of a status symbol because of its association with Colorado and Rocky Mountain ski resorts.

NOVELTY WITHOUT TARNISHING PROFESSIONALISM

Those of you in traditionally conservative businesses such as banking, healthcare, insurance, and legal services may feel uncomfortable with the idea of novelty. After all, people give you business because they trust you to protect what they most cherish. Just keep in mind that novelty is

RELATIVE to what others in your industry are doing. For example, a financial planner who works with professional athletes can use a “game plan” metaphor for marketing her services. Done tastefully, this adds enough novelty to provide a competitive advantage for getting more “looking good” referrals.

Finding novelty in your products and services takes some creativity and imagination but once you get the hang of it, you may be surprised by the number of ways you can add distinction within the range professional decorum.

CURIOUS ABOUT THE 40-LB. CAT?

As a last word, for those of you wanting a look at the one of the world’s fattest cats, you can watch the video by clicking here.

Some marketers argue that being obnoxious is better than beingignored–and for some businesses that may be true. The point is, if you want to be noticed and you want people to connect with you, beaware of the type of connection you're creating.

3. Make your message relevant and actionable.