Is giving stuff away for free the best marketing tool for startups?
This question follows a really interesting article on Forbes: http://www.forbes.com/sites/amyguttman/2015/10/11/startups-why-giving-stuff-away-for-free-is-the-best-marketing-tool/
The article and infographic (page 2) describes the state of U.S. startups. What's your take on the matter?
Absolutely! Granted, per many of the other responses, how it is structured depends on the type of business. And, it should be viewed as a marketing cost. We often tell our clients to develop a marketing plan. However many traditional types of marketing may be better served if rethought. As a start-up, TV, radio and print are not something in the budget (or that really makes sense for most businesses based on their target customer). Instead of a big print ad, that budget put towards free samples does make sense.
Consider this, if you own a new hamburger restaurant and want to tell everyone your hamburgers are THE BEST, which is more genuine? A big ad in the local newspaper stating your burgers are the best? Or giving out your burgers so people can try and determine that for themselves?
Any "sampling" or free offering needs to be done strategically and within budget parameters but if you want to prove your worth, it is a great way to do so. There are always ways to structure it, even for service companies. Our consulting business offers free consults for clients considering hiring us. It is limited to one hour and includes a follow-up document. Within that, if there are mutually beneficial options to work together, we highlight that. It is a great way to "sample" how we work with no commitment and for us to ensure that a project would be fruitful for us as well. If we can't help, we direct them to other professionals who can which saves time for all involved.
NO. Tester is one thing but each sample has a cost. Comes down to one thing. How many sample are you giving away to make a single sell. I can tell you my wife is a sample queen. Out of those samples she receives, you may consider one of those items. Here where the internet come in for her. She then take that sample and researches where she can purchase for less than the person who sent or gave her the sample. The product may get purchase, but you better be the best priced store or representative.
In my opinion, this is the best marketing strategy to be implemented by Startups to build brand awareness and identity of your Business. Giving away a free product or service is one of the most powerful techniques available for customer acquisition.
Companies like HubSpot, Newscred, etc. got success by using these marketing tactics.
And I think that Desighhill is on the right track of getting Success!
The infographic is pretty interesting and I liked the way that how we are interacting with the data by clicking on the Start button.
Giving away free products and services results in customer value, high customer satisfaction and a likelihood that they will tell others about your product/service, leading to viral effects.
A great example of a free service is given by Designhill which shows us how we can use interactive content to win the hearts of our valuable customers.
Give away a sample here and there to people who can post reviews if you must but otherwise don't give away your product or you'll have a difficult time getting people to buy it.
I think the big question to ask is "why are you willing to give away margin for minimal return?" This is what you are really doing when you give things away for free. It also sends the message that whatever product/service you have to offer that you are giving away isn't worth anything...the value is zero when it's free.
It also sends a message to your audience that the people you are marketing to are most interested and attracted to free. Finding free customers isn't marketing. Marketing is showing them the real value you offer that can change their lives and why they should be willing to pay for it.
Recommendation...DON'T DO IT
Personal opinion is that you should never give anything away for free, equally that doesn't mean you have to charge cash for what you have.
People tend not to value things that they haven't had to pay anything for and once you've done it once for free it's very hard to charge the full value for something afterwards. From the customers point of view it's an infinite price increase. I'm not saying it never works but if will cost you a lot more than you gain overall.
Having said that you can do some great marketing by offering white papers/ebook/online resources in return for business intelligence and I mean more than just an email address or phone number in order to bombard them with spam later. Ask them the kind of market research that help you grow your business, the kind of intelligence that you would have to pay another company to find out on your behalf. There are loads of easy tools to help you achieve this with little or no extra cost. This then helps you put out the next piece of marketing to hook these potential leads on to what you do.
It ends up being spiral to bring people to where you want them to be, which is a fully paying customer.
Giving away products or services is a two edged sword. Not every business is positioned to be able to do this and the ones who might be should think carefully before doing it.
When you give away something, it should have some specific value and be aligned with what you offer or who you are as a business. Best example is a restaurant or other food provider that gives away samples so that potential customers can taste before they buy. (think Costco food sampling stations). The further away from your primary offering your give-away gets, the less likely it will translate into sales. (example- a CPA that hands out monogramed pens).
Make sure that you can get out of your free offering at some point. Evernote ran into this problem of offering such a robust free service that most members had no reason to trade up to the paid version. If your giveaway is so compelling that people's needs are met, find a way to offer something less appetizing.
The best give-aways are mini replicas of your normal product or service. (example- complimentary sessions offered by a coach to people in exchange for testimonials). That said, know your costs extremely well. When Groupon first hit the market, many business owners jumped on the chance to offer aggressive coupon deals- many were free offers. Lots of these businesses did not do their homework or fully understand the cost of working with Groupon. As a result, there were numerous instances of businesses losing huge amounts of money just to fulfill the coupon offer.
Give-aways can be a great way to instantly connect with prospective customers. Just make sure your free offer is possitioned correctly, there's a clear reason to trade up to the paid version and you know how much the promotion will cost to deliver.
You never give anything away for free... no business that will stay in business that is. Even if you give $5,000 to the homeless you let all the media know what your company did and their "free" exposure about how wonderful you are is the advertisement you paid for and the "free exposure" they gave you helped them sell enough papers or advertising to pay for their loss in income. It is basically semantics. Call it what you will but it is always marketing. You can either pay the media or pay the free stuff, you still pay and you obtain additional business. It is also called a lost leader. You sell milk at cost at the back of the store. Yes you made $0.00 profit but as they trekked back to the milk they grabbed a few things on the way like donuts or something that goes with the milk but instead of making 30% profit you make 100% profit on those items to pay for the loss on the milk. If you actually give something away free, with no ulterior motive, you are not a very smart marketer and you stand to hurt your business.
Hardly. Not really. Marketing is far more sophisticated. We had an expression in Marketing "If it's for free, it's for me and I want three." But what people really want are good products and services.
“The aim of Marketing is to know and understand the customer so well that the product or service fits him (her/it) and sells itself. This is from management guru Drucker. And this is one of the reasons I created the Nine P’s. “People” or Targeting was slightly forgotten in the Marketing Mix, and is a major, significant part of the Nine P’s of Marketing.
Companies do not get potential users or customers to try a product by convincing them to love their brand. You get them to love a brand by convincing them to try and use the product or service.
Developing a strong brand is a byproduct. It comes from doing the other things in the Nine P’s of Marketing... right. It comes from doing the other things in the Nine P’s of Marketing... right. Planning, People, Product, Promotion, Price, Place, Partners, Passion and Presentation. Make sure the Product or Service is excellent. Research and Planning excellent.
Be sure the company is taking good care of their customers (People), and having the right Planning and targeting (People), the right Product, right Place or distribution, right Price, right Promotion, right Partners, right Presentation, with the right amount of Passion in the 9P’s.
Make sure there is differentiation. Giving away stuff is not a differentiation. Not even close. Unique Selling Proposition or Point, shortened to U.S. P., falls here too.
Differentiate based on the needs and wants of the potential consumers and businesses. That is what builds brands.
Hope this helps. All the best.
I've seen success in offering free items or memberships for businesses that want to secure some type of ambassadors for their product. Then, they are offered additional rewards for successfully recruiting new customers.
I believe that free items cheapens the product and some might even wait until they think another round of a free offering comes along.
If a service business, a free trial period is often successful.
I strongly believe that all businesses need their ambassadors. Loyalty is priceless.
Hope that helps.
This is a great article and discussion.
I would say it depends on the business, the cost per product/service and the ability to test to measurable results of the conversion of free clients to paid clients.
~ If your product or service is expensive and giving away it away for free will put the business in a deficit. That is never a good thing. For example a small business with not a lot capital can't afford to spend $1,500 a month in freebies. They need to start making revenue.
~Giving freebies away can be great but if the conversion rate is low and these free type clients are always looking for discounts and deals...etc it's not a really a strong way to build a business. This can cost your more money and time in the long run.
I would recommend having a intro product or service at a lower fee to get your potential clients interested. This way the psychology is there that they are willing to spend. Then when they like your product/service they are more likely to pay the full price.
It's much harder to bering someone from Free to paid versus from paid to pay more.
If you have business and/or marketing questions contact me at knssconsulting.com
It depends on what you do. I have two businesses - graphic design and knitwear.
As a graphic designer, I don't give away free samples. I do have non-profits to whom I donate time and design work. I used to donate small services to my chamber for the annual fundraising auction, but after the second "winner" threatened me because I wouldn't add other free things (photography, redesign their logo) I stopped.
I could give away small pieces of knitting, but what's the point? Small for me is a pair of mittens for an infant. If that person doesn't have a baby, it's something they don't need.
Thanks for siting this Article. What is said in the article is right, The freemium is a pricing strategy where a service provider gives free service but then charges after the usage limits or features.