Episode: Why You Should Still Be Charging for Your Products
Michael Hyatt: Hi, I’m Michael Hyatt.
Megan Hyatt Miller: And I’m Megan Hyatt Miller.
Michael: And this is Lead to Win, our weekly podcast to help you win at work and succeed at life. Today we’re going to clear up some confusion about a question many business leaders are having right now: “Should I be charging or should I continue to charge for my products or services during a time of crisis?”
Megan: This is something that, increasingly, is popping up on social media and in the conversations that are happening in the world right now. So many companies are offering free products and services. In a way it seems great, because one of the things our country has suffered from for a long time is a lack of unity. We have been so divided, not thinking about one another’s needs, not caring for one another, all that kind of stuff.
So the idea that we have a sense of a common enemy, that we’re all in this together, that we’re trying to help each other through it is really a great thing, and I think a lot of business leaders and business owners feel like one of the ways they can contribute to the solution is to help alleviate the burden people feel with economic impacts of what’s happening, so they’re offering things for free.
As you’re watching this happening, if you’re trying to make these decisions for how you respond in your own business, you may be really confused. You may feel a lot of pressure. You may feel even shamed by people if you’re trying to still charge for stuff. At the same time, like all of us, you’re trying to figure out how you move through this and sustain your business during these uncertain times. So you’re kind of looking at the tension between cash flow and also wanting to make a contribution and be part of the solution to the recovery and just the coping people are trying to do during this crisis.
Michael: Okay. Before we get into it, we want to bring Larry on and introduce him to this conversation, because he, of course, as always, leads us through the conversation. Larry, good to see you.
Larry Wilson: Hey, guys. Yeah, good to see you.
Megan: Hey, Larry.
Larry: Hi, Megan. When I say “see you,” I mean see you virtually.
Megan: That’s right.
Larry: Because we are recording remotely, doing everything remotely now, like everybody else. Okay. So, I’ve been buried in this crisis in my own parts of the news cycle, and I haven’t actually heard this one. Where is this coming from, this idea that you shouldn’t be charging people?
Michael: I’m seeing it from a couple of different sources. First, there are some very high-profile entrepreneurs who are talking about this on social media, almost bragging about it. They’re making all their content or certain products available for free right now. Maybe they have the cash reserves. Maybe they have the wherewithal. Maybe just the very nature of their business is such that there’s not really any cost involved, because maybe it’s a digital product, or whatever.
I think it probably flows from a good place. They’re trying to be generous, but there is that pressure from these sort of celebrity entrepreneurs who are doing this. The other place is from our followers or from people on social media who may be commenting if you’re running ads on Facebook, for example (this is where we’re seeing it), where people are kind of shaming us and saying, “How dare you?”
I had somebody on Twitter just the other day who said, “Hey, you need to knock it off.” I was promoting my new book, which is supposed to come out in a couple of weeks. They said, “You need to knock it off. This is not a time to be promoting your own products.” Of course, I immediately felt shame, and it made me evaluate everything I was doing, and I said, “Actually, that’s wrong-headed.” That’s really what we want to talk about in this episode. But that’s where it’s coming from.
Larry: I’m very interested in this, Michael, because with my background and my way of thinking, I would probably tend to sympathize with that high-profile guy who’s giving his stuff away. I would be tempted to do the same thing. So I’m very interested in hearing these three reasons. Let’s get to the first reason right now, which is: it doesn’t help the economy.
Megan: Yeah, this is a really important one. I think the impulse to give stuff away for free and, in doing that, not only kind of comfort people but alleviate the financial burden people are feeling right now as the economy is so volatile… First of all, that impulse is great, but the impact of that is very negative. For sure, there are so many businesses right now that are struggling mightily or have already had to shut down.
You know, people in the hospitality industry…travel, cruises, hotels, and things like that…restaurants, gyms, movie theaters. The places where people have to congregate for their services or products to be delivered have been hit really, really hard. The problem with giving things away for free is that when everybody gives everything away for free, the economy grinds to a screeching halt. We already have enough challenges in that department. There are so many things we can’t control that are already at a screeching halt.
What we need to weather this storm and come out on the other side to recover is economic activity. Economic activity occurs when someone creates value and someone else, recognizing that value, is willing to trade their money for what they perceive to be something that’s even more valuable than their money. So, what we need right now is for people to create valuable resources, valuable products and services that are relevant right now to the crisis we’re in so that can lift all of us up, but when we’re giving stuff away for free, we’re just taking money out of the economy.
The truth is there are many, many people who still have access to the same resources they did prior to this crisis. Nothing has really changed for them. Their paychecks haven’t been cut. They haven’t been laid off, those kinds of things. They still have money to spend. They may be more cautious, but they’re not in a position of financial hardship yet; they’re in a position of fear, and those are not the same things.
Michael: Sometimes economists use the metaphor of blood in the body, and that’s how I think of cash circulating in the system. Once that circulation stops, bad things start to happen. Like you said, Megan, this isn’t the end of the world, and there are a lot of people… The vast majority of people have yet to be economically impacted by this. They still have money to spend. They’re still getting a paycheck. It’s business as usual. The only thing that has changed is their psychology.
The problem is our psychology is, in large part, what props up the economy. We live and work in a psychology economy. It’s not just a physical thing or even a digital thing with money, but there’s this psychology, this sense of confidence about the future, this sense of certainty about what’s taking place that drives the economy. Each of us has our part to play, but if everybody starts giving away free stuff, that puts pressure on everybody, and the whole economy comes to a screeching halt.
Frankly, from my perspective, the economic impact of this is far more frightening than the health implications. The health implications are driving it. That problem has to be solved. I get that, but the long-term is going to be the economic impact, and we have a choice as to whether we’re going to mitigate that or we’re going to contribute toward it.
I think entrepreneurs, in particular, are the ones who are in the driver’s seat right now, because we drive, according to the US government, at least in the US… Eighty percent of all jobs in the US are provided by entrepreneurs. So if we stop selling our stuff and just give it away for free, that’s not going to be sustainable. You can’t do that for a very long period of time.
Megan: The truth is the only reason we’re, for example, able to give so many things away for free… We certainly have free resources, and we’re not saying you shouldn’t give away free resources. We’re just saying don’t do that exclusively or to your detriment. The way we’re able to do that is because our paid products allow us to have the staff we need to produce the things we produce for free. If suddenly we didn’t have any revenue coming in, it wouldn’t be long before we wouldn’t be able to sustain the staff we have and, therefore, wouldn’t be able to contribute to anyone, free or otherwise. So, I think that’s an important point to remember. This stuff is all connected.
Not only that, but you have a team right now that you’re responsible for. In our case, we have 40 families we’re responsible for. If we were to give everything away or our most valuable products and services away for free, what would that do to them? We’re responsible to continue, to the best of our ability, to provide those opportunities for the families that are in our stewardship. We take that really seriously. All we’re saying is you want to carefully consider this.
Maybe it helps to frame it up in terms of examples we’re all familiar with. One I was thinking of earlier was Instacart or Shipt. Those are two grocery delivery services. I think there are others as well, but those are maybe the ones we’re most familiar with, where you pay a membership fee and they will bring your groceries from your favorite stores. I think they serve a handful of stores each.
If all of a sudden Instacart, looking at the plight of the American public, said, “Hey, we know it’s really hard to get groceries right now, guys, and, in fact, in some places it’s dangerous for you to go out and get groceries, depending on your health situation and other things, so we just want to waive the membership fee for Instacart, and we’re not even going to have you tip the shoppers, because we know that adds 10 percent or more to your grocery bill. That’s not something we want you to have to undertake right now, so we’re just going to make this available to you virtually for free…”
Well, the truth is Instacart is an incredibly viable business right now, and they’re going to be part of the economic recovery, for sure. If they were suddenly to become not profitable and had to shutter their business, that would impact all of us. Right?
Michael: Yeah, totally. I think that’s where we have to get over this idea… There’s no such thing as a free lunch. Somebody ultimately pays. If you look right now, we’re doing this podcast with Larry, who’s one of our senior writers on our content team, and with Nick, who’s producing this show. We’re paying them to be involved with us in producing this free content.
The only way we can continue to do free content is something else in the business has to generate money that makes this possible. I just think that sometimes, too often, people, in their glee for free stuff or maybe even in their envy or frustration with big corporations, demand more free stuff, but there’s no such thing as a free lunch. I know that has kind of become a trite thing to say, but it’s really true.
Larry: This discussion puts me in mind of something that then President George W. Bush said. I believe it was right after 9/11, where he encouraged people to go shopping and spend money because he was concerned about this very thing, that a national crisis would cause people to tighten up, not do the things they would normally do, and that would have a detrimental effect on the nation’s economy at a time when we really needed economic strength. It’s a fascinating point that we have to keep the money circulating.
Michael: And just to add one more point to it, the last thing we need is more people unemployed. We went into this crisis with a robust, unbelievable economy; I mean, honestly, the best economy I’ve seen in my entire career, and much of that was that we had such phenomenally low unemployment, but if suddenly the unemployment rises because people are giving away too much free stuff and can’t stay in business, that makes the recovery just that much more difficult.
It puts that much more stress on government agencies to provide for people who can’t provide for themselves. So I think it’s the duty of everybody to do their very best to continue to work, continue to engage in business, continue to buy stuff; more importantly, continue to produce stuff they can sell where they can create value.
Larry: So, the first reason you should be charging for your products and services even during a time of crisis is that it doesn’t help the economy to give everything away for free. Let’s talk about the second reason: it doesn’t help your customer.
Michael: This is a little bit counterintuitive, because we come at this from a generous heart. We want to give people stuff, but I have a lot of experience over the years giving away free stuff. One of the things I discovered is that sometimes my generosity got in the way of people’s transformation. Let me explain. We used to do, back in the old economy (up until a week ago), live events. Sometimes people couldn’t afford to come to one of our events, like The Focused Leader or back when we were doing Your Best Year Ever, one of those events, so I’d just give them a free ticket.
I did that a lot, because, again, my heart was… I thought if they could get into the event it would be huge for them and would be helpful for them, but what I found is that the people who didn’t pay didn’t pay attention. I want to say it again. If you don’t pay, you don’t pay attention. The people who got the free stuff were the people who didn’t show up. For some reason, they just didn’t show up. For a second reason, they came late. Or another thing that would often happen is they would come late, they wouldn’t stay the entire time, and even when they were there, they just weren’t focused, because they didn’t have any skin in the game.
Gail and I had the experience (this was a couple of years ago) where we bought tickets to somebody else’s conference for a friend of ours who we really felt could benefit from it. And these tickets were not cheap. I’ll just tell you, we spent $3,000 for her and her husband to go to this event.
Larry: Oh my.
Michael: A week before the event, they pinged us and said, “You know what? As it turns out, we’re not going to be able to go to that event anyway.” We had to eat those tickets because it was too late to get the refund. We couldn’t go. We couldn’t find anybody else to take them on short notice. I promise you, if it had been their $3,000, that wouldn’t have happened. So I learned the lesson the hard way.
Sometimes when we’re trying to help people when we give them free stuff… Again, I’m not talking about essential services like food and shelter and some of those things, but some of the things we give away to people… Like, if you give a free course away, if you’re in the online course business, you might want to do that for strategic reasons, but by and large, those will get downloaded, put on a disc, and never, never used.
Larry: I can affirm that from my own experience, Michael. Because of the various positions I’ve held in my life, I’ve gotten a lot of free books. People would want me to read their book, for some reason, or I would be seen as a gatekeeper for the congregation I was serving, and the book I was least likely to read was the one I got for free.
Megan: So true.
Michael: I get them all the time. Publishers send me stuff all the time, hoping we’ll have the author on this podcast. By the way, if you’re that person, you know we don’t have guests on this show. What that says to me when a publisher or somebody else sends me a free book and wants the author on the show… I say, “Well, they’ve never listened to our show, because they would know, if they did, that we don’t have guests.”
Anyway, I’m going to go on a diatribe here if I’m not careful. But, yeah, I get those free books literally every single week, and I hate to say this, but those go automatically to the public library, or at least they used to, because I don’t have an interest, and they’re free, and it’s not something I bought myself. But if I buy the book, much higher chance of me reading it.
Larry: The first reason you should be charging for your products and services, even now, is that it doesn’t help the economy to give things away for free. The second reason is it doesn’t help your customer, because they don’t tend to value things that don’t cost them anything. Let’s move to the third reason: it doesn’t help you.
Michael: The challenge every company has is to try to get through this crisis and get to the other side. I was watching a Matthew McConaughey video today where he said, “This is a big red light, but there’s a green light coming, so you’ve got to have faith that a green light is going to come.” That’s really true. Ultimately, that’s what’s going to happen.
But there may be a lot of companies that on the front end of this think, “We have a lot of cash, we have a lot of resources, so let’s just give stuff away.” It’s all relative. It’s all relative to how long this crisis lasts. I don’t think just giving stuff away… First of all, it doesn’t force you to innovate as a company. It doesn’t force you to pivot as a company. It’s not going to keep your resources stocked so you can weather the storm if it gets longer.
In our particular case at Michael Hyatt & Company, frankly, we have a lot of cash reserves, so we’re in great shape going into this, but we can’t last indefinitely. Every dollar we earn is a dollar we don’t have to take out of savings to put toward people’s payroll and all of the other things we need in a business. So it doesn’t help you, as a business owner, to just give everything away for free. It’s certainly not a long-term sustainable strategy, but I don’t even think it’s smart in the short term.
Megan: One of the things I’ve also seen happen on social media is local businesses asking people, asking their customers to continue to pay for services or products they’re not able to access right now. For example, someone with a karate studio asking their recurring clients to continue to pay for classes even though the kids can’t go to classes. It’s kind of like, “Hey, help me make it through this, clients, by continuing to pay me for something I can’t give you anymore until we can figure out what to do.”
Certainly, there’s some benefit in that over the short term. Or “Please buy gift certificates to restaurants that are now closed so they can continue to have cash flow.” Here’s the problem with that, though. That is outsourcing your agency as a business owner and as an entrepreneur and as a leader, because that is not a sustainable solution. You’re actually asking people for charity and goodwill to kind of hope that’s going to carry you through. That is really what it is. That’s kind of hope as a strategy. Unfortunately, hope is not a strategy.
What is a strategy is putting on your innovative thinking hat, working with your team to innovate, to pivot, to figure out a new way to offer something that’s truly, truly valuable and relevant in this environment, and then asking your customers to pay what it’s worth. That’s what’s needed to move the economy forward and to enable a real recovery effort. It’s not going to be people chipping in, while that may have some short-term benefit. It’s going to be finding new things people are willing to pay for that create opportunities not just for a business owner but for their staff and potentially to hire more people. That’s how we move forward.
Michael: Yeah, I don’t see this as a bad thing in the short term if it helps you get through a week or two while you’re putting your thinking hat on and getting busy creating, but it can’t be a substitute for that either. One of the things I’ve seen has been awesome. We have a friend of ours here in Nashville who has a music studio, and it would have been easy for him to just rely on the goodwill of his customers to keep paying, but instead he pivoted, and now he’s providing those same music lessons over Zoom.
That’s probably something that needed to happen for a long time and something that may be an innovation he wants to continue even after we get through this crisis. That’s the thing about a crisis like this that I love. It accelerates a lot of decision-making around things we should have done before. For example, remote working. We’ve had an experience with that for eight or nine years. It has been fabulous. Our people are so productive. We’ve developed some agility with remote working, and we highly recommend it.
There are other companies, though, that have said, “Well, we don’t really trust our employees” or “We’re not sure we can do that” or they haven’t figured it out, and this is going to accelerate and move them into remote working too. They may discover that, actually, their teammates are more productive in a remote environment than they are otherwise. So there are a lot of good things that come out of this if, as a business owner, you’re willing to do the hard work. The problem with charity, too often, when it’s misguided, is it keeps people from solving their own problems and creating the innovation that’s necessary to drive the economy forward.
Larry: I have a question for you on a slightly different tack on this third reason that it doesn’t help you. I have seen people, separate from crisis, give away products and services as an act of public relations or public generosity to try to build their brand image. I don’t know if that’s partly what’s driving this movement you’ve mentioned so far, but if it is, do you think that works? Does giving away your stuff for free help drive your brand image or build your platform?
Michael: Well, in that particular situation, here’s what I wouldn’t do. I wouldn’t give my primary product or service away for free. Where I think that does work is when an organization makes a charitable contribution to an organization so they can actually use that in a way that’s meaningful to their constituents. For example, if I want to give cash as an organization… I don’t actually give anything through my company, because I have an LLC, a pass-through entity, so my charity is the same as the company’s charity.
Gail and I are, frankly, pretty liberal with our contributions, but I’d rather give cash so that organization I’m giving to can translate it into food, in the case of World Vision, or care for people who are underprivileged overseas or, in the case of an educational institution, like a seminary I contribute to… If I were to give away my products, that might be helpful, but what would be more helpful is if they can take those dollars and use it for scholarships or use it to feed students or house students or something like that.
Megan: Larry, I do think you’re right. It can be part of a larger marketing strategy, whether that’s in a time of crisis or not, and there’s nothing wrong with that. If giving people a smaller part of what you do for free can help to introduce them to your brand, no problem. We give stuff away for free all the time. Part of the reason we have Lead to Win is to build our audience, to introduce new people to the resources we have to offer, and there’s no shame in that. It’s totally fine. I think, as we look at this whole big picture, it’s really a question of strategy. What is your strategy for moving through this economic downturn?
How extensive that will become we don’t know yet, but certainly that has already happened. We know that. What’s your strategy to get through it? How do your paid offerings and how do your free offerings fit into that in a way that allows you to sustain your business, to continue providing for the people you’re responsible for, and ultimately, to create more opportunity for those people and for future people you could hire who may be otherwise displaced by this crisis so that, as a group of entrepreneurs, we can boldly step into the future and help raise each other and the rest of the world up as we move forward?
Larry: Well, today we have identified three good reasons you should continue charging for your products and services despite being in a time of crisis. Reason one: it doesn’t help the economy when you give things away for free. Reason two: it doesn’t help your customer, because what’s obtained freely is of little value. Reason three: it doesn’t help you to think through the problems you’re facing and to innovate solutions. This is a challenging episode, guys. You’ve challenged my thinking on this and made a convert. I’m going to charge for my time now. No more volunteering at Michael Hyatt & Company.
Megan: We’ll put you back on the payroll, Larry.
Larry: Final thoughts for our audience today?
Megan: Well, I hope if you’re a business owner or a business leader, an entrepreneur, that you take confidence from this. I think this movement we’re seeing a little bit can certainly ding your confidence and make you hesitant as you’re selling, and what we want is the opposite of that. We want you to be bold. We want you to step into the uncertainty.
We want you to innovate around your products and services so they’re more relevant than ever and offer something that’s truly useful and helpful to the world right now. We believe you can do that. So that’s my hope for you: that you would grab on to this message with confidence and step out there and charge for your products.
Michael: I have a word for business leaders and entrepreneurs and business owners: expect blowback. When it happens, understand it. It’s probably coming from a good place. People are just trying to be helpful. Unfortunately, they’re trying to be helpful with your stuff. It would be more helpful if they were helpful with their stuff.
Realize you’re going to get blowback, but don’t let it dishearten you. There’s a huge difference between the one who’s on the field playing the game and the person who’s in the stands second-guessing your every move. You have to realize you’re on the field. You’re calling the plays. Ignore the audience, and just try to get into the end zone.
The second thing I would say to those of you who may not be business owners but may be leaders in some other capacity, and maybe you’ve been tempted to judge people who are continuing business as usual or who are trying to sell… I would say to you: Don’t be that guy. Don’t try to shame other people.
In fact, I would say, go out of your way to thank the entrepreneurs in your local community who are struggling, who are staying up trying to figure it out, who are probably experiencing a lot of anxiety, who are having sleepless nights, who are sacrificing, trying to keep it all together right now. Those people are the key to our future, and the more you can do to encourage them, the better off it’s going to be for our country, for our world, and for you individually.
Larry: Michael, Megan, thank you very much.
Megan: Thanks, Larry.
Michael: Thank you, Larry. Thank you, Megan. And thank you guys for joining us today. We’ll see you right here next week. Until then, lead to win.