8. Nothing is For Free, Even If It's Free
In marketing and promotions... and life, somebody always has to pay.
There's no such thing as free. And once we all truly accept that, we can remove a lot of frustration.
Let's take a look at the athletic event business for a minute. The average margins in that industry are relatively low compared to other industries. I hate to burst your bubble, but that $30 bottle of wine you bought at the restaurant last weekend only cost the restaurant $10, while the $30 fun run you did cost the event organizer $28.
Between marketing, merchandise, timer fees, city permits and various supplies, it’s not that hard to put on a 1,000 person event and lose money.
The running event industry, in particular, is in a challenging position. Partly because of these low margins, many company owners want so many things for free. And that, unfortunately, is not a viable business model.
Here’s my theory, as long as you have a pair of sneakers and a few minutes of extra time, running is free. Almost anybody can go out for a run whenever they feel like it. So when they pay for a running race, it’s a big deal because not-so-deep in the recesses of their mind, they know that they are paying for something that they otherwise do without paying.
In spending that money, participants’ expectations are getting higher and higher. If one event is willing to have firemen at the finish line giving away Tiffany necklaces to every finisher, well why the heck aren’t other events doing something equally as scintillating.
Runners don’t understand the cost of putting on an event. Because, well, in their mind running is free. So everything that comes with running should be free.
But that’s not the way life works. Somebody is going to pay.
Somebody is always going to pay.
Race photos are the latest item in the “we want it for free” bullseye. Most athletes have their smart phone with them on the course, so they can take their own pictures. Why the heck would they want to pay $85 for your “official” photos. As smart phones become more prevalent amongst runners, so the traditional event photo business has, for lack of a better word, tanked.
If I had a million dollars for every time a race director came to me and said “I want to give photos away to our participants for free, and I don’t want to pay for them”, I’d be a multi-millionaire. Races don’t want to pay for photos, participants don’t want to pay for photos but everybody expects there to be photos.
Unfortunately, in the end, somebody is has to pay. Nothing is for free. Sure the payment may be hidden in another cost, but I guarantee you, somewhere along the line, somebody is definitely paying.
Naturally, when you negotiate with your vendors and partners it only makes sense that you try to get the lowest price. I talk to a lot of race directors and the unsaid feeling is that many would love to get their medals, shirts and marketing all created for free - or as close to free as possible.
That "free" shirt participants get just for showing up - there are at least four companies (designer, manufacturer, printer, shipper) that have to make money just to create that "free" shirt. In fact, your friend did the design as a favor so let's make it three companies that need to be paid.
As we all know, that shirt isn’t free. It’s far from free. The price is just embedded in your entry fee, so essentially your participant is paying for it. Want to reduce the price of that shirt so you can make more money? One of those three parts of the supply chain need to reduce their cost. And if they reduce their cost they need to either 1) increase volume to make the difference or 2) skimp in other areas to maintain their margins or 3) eventually sacrifice innovation and growth.
It's the same with your other vendors. As industries get squeezed on price, there are only a few things that can happen:
1) Innovation becomes stagnant without the money for R&D
2) Product quality goes down as vendors try to save costs
3) That company you are so proud to have gotten a great price on, they go out of business because they don’t have the volume to maintain the low margins
This is basic economics.
Whenever I see a restaurant that suddenly advertises "free jazz with two for one drinks”, I know that restaurant is on the verge of closing down. If you have to give it away to get people in, what you're saying is you are ok losing money on every customer just as long as you have customers. That model doesn't scale. That business is going to be gone in time.
Are you responsible for understanding the breaking point for your vendors? Absolutely not. But a mindset of a fair product for a fair price is what keeps the entire world economy in balance.
Remember, you get what you pay for.
And, trust me, somebody always has to pay.