The value of free: how businesses benefit from giving stuff away

A lot of companies are growing their businesses and profiting from giving things away for free. But how are they making money this way?

free samples
Credit: Myrtle Beach TheDigitel

It might sound counterintuitive, but some companies have discovered they can benefit from giving away products and services they paid to produce. From the consumer end, we often see this – in the supermarket, on websites and in stores.

So how do businesses benefit from giving stuff away? 

The benefits of free

Everyone loves the word “free.” There’s something about getting free stuff that gets most people’s blood pumping. 

That’s why you see people do stupid things to get items for free. If they were honest with themselves, most consumers would have to admit that, most of the time, the free item isn’t worth the trouble they went through to get it.

It’s more the fact that the item happened to be available for free … not that the actual item or service was so valuable in itself.

From a business perspective, giving away something for free often supplies value on the back end. Sure, the upfront costs can be substantial, but the investment can easily pay off in some monetary form a little farther down the road.

Take a closer look at a handful of the benefits -- along with some real-world examples -- to get a better idea of how “free” can benefit a business.

1. It creates a buzz

Free giveaways can be used to generate buzz around your brand. This is why you frequently hear about giveaways and contests when a retailer holds a grand opening event.

The store management knows that by coupling the launch with the distribution of free goods, they’ll be able to generate more excitement. When Black Friday rolls around each year, many retailers use this same logic to get people into their stores.

They’ll offer a free product (or heavily discounted one) to a limited number of customers to generate excitement and publicity. It’s a simple, yet effective technique.

2. It drives traffic

One of the primary benefits of offering something of value for free is that it garners traffic. This is true for both brick-and-mortar businesses and ecommerce outfits. Consider a couple of examples to get a better idea of how this can work:

  • Subaru gift card promo. Subaru recently resurrected its gift card promotion strategy, in which people can get a $50 Prepaid Visa Gift Card in return for test driving a new car at a local dealership. The aim is to bring in customers who are intrigued by Subaru but need a little more encouragement to take the next step.
  • Doc’s Sports free picks. Millions of Americans enjoy placing casual wagers on sporting events, so an entire industry -- known as “sports handicapping” -- has emerged from that premise. One of the biggest names in sports handicapping is Doc’s Sports. In order to draw people in to the company’s paid subscription services, Doc’s offers free picks and predictions. By offering these complimentary picks, the firm is able to increase its website traffic dramatically and reach a new demographic mix of potential customers.

In both of these instances, the free offer serves as a magnet. It attracts customers that otherwise might have passed right by the store or website. This approach won’t get everyone, but it can certainly have a positive impact when the right approach is taken.

3. It hooks customers

Free food samples at supermarkets are a classic example of an item that’s passed out to the public for free. There are many potential benefits to distributing free food samples, but the primary advantage is that they hook customers and encourage impulse purchases.

Think about it. If you walk into a store and see free samples of ice cream, you’re naturally going to gravitate toward the booth and get a taste. Assuming you like what you taste, you’re going to be much more inclined to purchase the product than you previously would have been if you had only seen the packaging in the freezer section.

In instances like this, the free product sample introduces itself and hooks likely buyers. When a business is confident in its product, their marketers know that a free sample will entice more customers to make a purchase.

They’re betting on the idea that the expense of handing out the free samples will be more than counterbalanced by the subsequent sales. Costco is a company that does very well with free samples: it frequently expands the sales on certain items by as much as 100 to 600 percent.

4. It develops positive brand associations

When you give something away for free, you’re essentially investing in positive brand recognition. People love to get something worthwhile at no charge with no strings attached. It makes them feel special, and that they’ve come out ahead.

Thus, many customers have been shown to prefer a free appetizer over a 15-percent-off coupon at a restaurant. The coupon may be worth more in actuality, but the word “free” makes the appetizer option more appealing.

People perceive free as better, and that has a positive impact on how they regard your brand. One example of the positive psychological impact of “free” comes from Jason’s Deli, a popular restaurant with locations in a couple dozen states.

Jason’s offers free ice cream with every purchase. It’s a small thing, but customers automatically associate the restaurant with free ice cream. It’s a positive linkage that exceeds the cost of the ice cream itself.

5. It encourages feedback

Finally, freebies can be used to encourage feedback. Though many free-giveaway strategies are implemented without asking for anything in return, sometimes it’s appropriate to ask for feedback.

Take a new product launch, for example. Sometimes companies will give away products to a small group of first-time customers and then ask them to fill out a brief survey or poll. The idea is that the free product makes people more willing to give something in return.

Other times, online businesses will give away free eBooks or white papers in return for contact information. This is the same concept. People are okay with responding to a favor with another favor.

Let “free” benefit your biz

From a business perspective, “free” can be an intimidating word. The goal of every business is to make money, after all.

But the various examples in this article should make it easy to see the benefits that free samples and giveaways afford. Sometimes the benefits are apt to be significantly distant, but at other times they may be more immediate.

Regardless, you should look for ways to leverage the value of “free” in your future marketing and advertising campaigns.

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