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Front Page » January 7, 2014 » Opinion » Free and cheap are inexact terms
Published 644 days ago

Free and cheap are inexact terms

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About 25 years ago, a friend of mine, whom I was in business with, started talking about the economy and what we saw in the future. Few people can predict the what is to come, but we both came up with the idea that low prices would cause the death of the middle class in the United States.

We took this from the fact that we were reading about how large box stores, offering everything at a low price, would eventually drive small businesses out of business. We also resolved that the tendency to look for low prices would eventually drive every business that could still stay in business to look for a place which could make what they needed the cheapest.

We were right and we were wrong. Or more exactly, we only got part of it right. We forgot about free.

While low priced stuff has flooded our economy, creating a situation where many jobs, particularly manufacturing jobs, have been shipped overseas, the so called free stuff economy has also damaged business and the middle class.

The fact is that the term free, is an inexact term. Nothing is ever truly free when it comes to an economic model. There is a cost to everything, but how it appears depends on who is paying for it and how they are paying for it.

There are basically two models for a business to provide free stuff or free products to people.

One is promotion. Many businesses build in expense categories to their budgets each year to provide 'bling' to people at shows, events and even through the mail. Almost all businesses do this. A free item can be something as small and as cheap as a plastic pen with the company's name printed on it, to a much more substantial prize, particularly for valued customers. A lot of what one gets for free from a company has to do with what you buy from them. If you spend a few dollars a year there, it will be the plastic pen. If you bought a large piece of equipment for a business application that cost a couple of hundred thousand dollars, you might get a really nice Christmas present from that company. The fact is, however, you have paid for it through the price you paid for the product you bought. A free cruise that is offered if you buy a new car is never free; somehow, somewhere you are paying for it, even if you get a seemingly great price on the vehicle you purchased.

However, promotion of product through gifts, giveaways or promotion pieces has been going on since the beginning of time. It is the way business has been done forever, so that didn't fall into our thinking at the time. And I don't consider that kind of thing a threat to anyone. In fact making promotion stuff in of itself is a big business.

What is different is the other type of free; the one where a company seemingly gives you their product for free. We are seeing this more and more in our society.

The problem (or opportunity as some people see it) has really grown since the use of the internet has become ubiquitous. The world wide web offers so much for free it has primed people to think that everything should be free. Just look at the information and entertainment offered on the web. Many sites have free offerings, but they also offer more services or additional features for a cost.

When I first saw Facebook I wondered how it could be offered for free. Afterall, with all it does and offers it seems like it is a little too good to be true. Then I saw a credit card charge for $75 from the company and that is when I found out there are additions to games and other services that you can buy. Someone in my house had been purchasing some of these services.

This mindset that you can get things for free, and have them either be good or even adequate, is permeating our society.

There is often another way you pay for something you seemingly get free. The free product either isn't complete or is of poor quality.

In business, no one can offer you something for nothing without someone sacrificing somewhere.

It's interesting to see the attitudes people take about getting things for free. Many don't think about the people who produced what they are getting gratis. When one buys a quality product it usually comes from a company that has people who are paid decently and have full time jobs with benefits. Consequently, the product costs more. But it usually serves your needs better as well.

The cheaper something is (and especially when it is free) the less chance the people who work for the company are compensated well or have full time jobs.

This is especially true when the business you may be in is affected by how others in the community do financially. That in fact is everyone whether you work for the federal government or a coal mine. It is a fact whether you work as a waitress or a school teacher. It is a fact whether you work in manufacturing or a service industry. We are all interlinked in a myriad of ways.

It seems in these times, as a worker or an employee, everyone thinks they should get top dollar for what they do, yet when they look across the street at another business, those people should do what they do for near to nothing so that it can be sold at a low price.

So the next time you are offered something free, remember, that you are paying for it in one way or another. Remember as well, that somewhere along the line, someone, somewhere may be paying with reduced work hours or maybe no job at all.

And that too, at some point, may come back to haunt you.

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January 7, 2014
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