We are now in the age of free. Free Big Macs, Free KFC grilled chicken, free ruby pendants (while supply lasts) from Stauer. My email from them had the banner ad in the email: Buy NONE get ONE.
Those who thought up the campaigns are no doubt high fiving each other because Americans will stand in line for quite a while for something free. And that free day’s test results will look awesome. But how effective is the marketing in elevating business long-term?
In the months following the terrorist attack of 9/11 auto manufacturers needed to stimulate their sales so they offered zero-percent financing, and yes car sales increased. But something else happened. Car buyers know a good deal when they see one, and why pay for financing when you can get it for free? So auto manufacturers became locked into the concept of zero percent financing but they had to figure out other ways to still make money, so the gamesmanship began, but a savvy public wasn't buying because they knew it was no longer the deal it used to be.
Free samples have always been a good idea to test market products and get people familiar with what you are offering, but it also can devalue the product if you give too much away for free. How good can a free ruby pendant be? You know that was your first thought when you read that.
Deep discounting sets a new price in the customer's mind. Will you ever be satisfied paying more than $5 for a foot long sub again? Are newspapers dying off because they no longer are capable of reporting on the news, or is it because they began to give it away free on the Internet? When Costco gives away a cracker with lobster spread on it, it is a sample. When they give away an entire container of the spread it's devaluing the product.
Free is a slippery slope that only works if there is a payoff of more loyal customers down the road. Denny's had people lined up in the parking lot for their free breakfast day where they estimated 2 million people participated. Have you seen a line since then?
Know your market and when you offer something for free, be sure there are lasting returns and you aren't just the freebie of the day.
If you want FREE to work for you:
1. Make sure it is a tease opportunity to sample something you want customers to buy later. Giving the full product away devalues the product, unless it is in scarcity like a lottery winner.
2. Monitor the traffic or sales of the free product to see how your actual sales were truly impacted. Just because they now know you doesn't necessarily mean they are buying from you. The Taco Bell dog was recognized as their brand over 95% of the time, but those ads showed no bump in sales.
3. Free is a great way to get your name out on new products or as a new entity, but you have to have a strategy in place of where free will lead to profits within a specific time frame. After all, you are running a for-profit business.
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