Is ‘Free’ a Good Marketing Approach?

There’s nothing wrong with offering the occasional sample freebie as long as you don’t undermine your brand’s value.

“Free,” some people say it’s the most powerful word in the English language. Others consider it as a magical marketing term. For businesses struggling through tough economic times, using “free” to lure leery customers can be tempting indeed. However, you might want to think twice about that approach.

As a consumer, most people like getting something for nothing. In the business world, however, there’s really no such thing because anything of value ends up costing somebody something. When companies make a gratis offer, what they are really doing is muddying the cost-benefit equation and making it more difficult for their prospects to make a clear value determination. It is rather like getting a tax refund because it feels like found money, but offering a no-interest loan to the government isn’t necessarily to your advantage.

However, there is no doubt that a freebie can be irresistible to consumers, especially those who are adept at gaming the system without purchasing anything. (They sure are not the ones you want to attract.) Few advertisers recognize the damaging effects that free offers can achieve, even when they do lure people to buy.

Here are the “Three Ds” to be aware of when offering “free”:

1. Free is dangerous. The price isn’t just a reflection of value; it is an indication of value. When something is offered for free for any length of time, people begin to value it less. Over time, this can make them unwilling to pay a premium for it or even want to pay for it at all. So although it may seem at first as if “free” helps your value proposition, ultimately it could hurt it.

Remember when it felt really special to get a free basic cell phone when you signed up for a two-year service contract? Now we’ve come to expect it. Similarly, many newspapers are struggling with their online versions, trying to charge readers for that content after having offered it free for years. As e-commerce companies increasingly offer free shipping and more hotels offer free high-speed Internet service, both will become ever-more difficult to charge for. We’ll still pay for them because those costs will be hidden in other charges. You have probably noticed lately that e-commerce is greatly affecting mortar and brick businesses…..many are going into receivership. Only those wise and savvy enough to realize that they need to employ the e-commerce model to keep up, are going to survive. That is because many younger people do everything on their devices and find shopping online much faster and more convenient.

2. Free is duplicable. If you can offer something for free, so can your competitors. The more competitors that pick up on your offer, the more quickly they will match it. What might begin as a temporary tactical advantage can quickly become an industry “standard”— for example: the frequent flyer programs that most airlines now

Years ago a local grocery chain began doubling the value of the coupons people brought in from their flyers. This move attracted a lot of attention and competing chains soon began to match the offer. Soon enough a coupon war was on, and it didn’t end until triple or even quadruple coupon offers decimated the chains’ razor-thin profit margins. Finally, after losing millions of dollars, they stopped the practice. This sort of situation has been repeated thousands of times in hundreds of industries, from fast food to industrial equipment…..interesting that no industry seems to learn from the mistakes of others.

3. Free is deceptive. This may not be so for your customers, rather it is deceptive to you. It is easy to forget that there are four marketing Ps. If your product, place, and promotion don’t add up to something of clear value, you can’t expect the pricing to bail you out. Car dealers have historically been the perfect example of this sort of approach, promising lots of free giveaways and discounts when the bigger problem and actually the significant opportunity is generally just how unsatifying or even annoying the car-buying experience tends to be. It seems they have no idea what the real problem is.

Other companies that only advertise seasonally or infrequently can misunderstand the danger, too. Here is the problem, instead of steadily building a consistent and strong brand around a real value proposition, they expect to benefit from the immediate impact of every ad. That makes it natural for them to turn to the “magic word,” not realizing that a short-term focus often compromises their long-term prospects. Offering something for nothing seems so easy when in reality it can be one of the hardest things to recover from.

“Free” is fine in small doses for limited periods of time, such as a free initial consultation or a free sample of a new product at the supermarket. It is both smart and inviting to offer something at no charge as a gesture of courtesy or appreciation to existing customers, from free parking to an occasional thank-you gift. Making those gestures can actually have a positive effect, precisely because it is after the sale. Meaning, your customers have already accepted your price-value proposition as reasonable, and the value of what you’re offering them doesn’t call that into question.

It is when you offer something for nothing as an enticement to buy your product that the danger can occur. If you try to fool your prospects by making your pitch about what’s “free,” you will also be fooling yourself into believing that approach will ensure repeat customers. Instead, it is better to focus on demonstrating the real value of what you have to offer so that your prospects will be happy to buy your products. In that way, both you and your customers will benefit!