The best entrepreneurs and most successful businesspeople are those who are capable of embracing some of the more counterintuitive lessons of business, the kind of lessons that can only be learned through experience. A prime example of this is the realization that you can make money in the long term by offering your customers something for free right now.
Of course, consumers love freebies, heck, who doesn’t love a freebie?! Offering your customers something for nothing isn’t just good for them though, it caries with it a number of benefits for your business in both the short and long term.
Customers Will Spend More
The reciprocity principle is an important marketing principle which states that if a consumer is offered an item for free then they will naturally feel an obligation to reciprocate and repay the favor. The reciprocity principle applies even when the favor being offered is unsolicited, therefore you can use the offer of a modest freebie to entice consumers in to spending more with your business.
An excellent real-world example of this can be found in 7-Eleven’s annual Free Slurpee Day. As the name suggests, when Free Slurpee Day rolls around, customers can enter any 7-Eleven store in the United States and receive a 7.11 oz Slurpee completely free, no strings attached! To some of you this must sound like madness, perhaps as if 7-Eleven is trying to say a big, expensive thank you to the public in the form of a PR stunt.
On the contrary, despite giving away around 4 million Slurpees each year, the company reports an average rise in sales of 38%! That’s right, by offering their customers something for free 7-Eleven are able to make money.
Data and Research
In today’s world data is power. Businesses with access to vast stores of data, and the necessary infrastructure required to analyze and interpret it, are able to gain a much deeper understanding of the markets and their own customers. A great example of this is Google’s reward program, under this program Android users can periodically fill out short surveys in exchange for free Google Play money.
By enacting this initiative, Google are able to learn more about their users as well as making money by charging other businesses to conduct surveys on their behalf through the rewards program. Meanwhile the Android users themselves are being paid in the form of store credit and are therefore able to buy apps, books, music, and even films through Google’s stores.
Customers Will Pay More Later
The field of psychological pricing is a very complex one, we are only just beginning to truly understand and exploit consumer psychology. One of the effects that we can make the most use of, which is similar to the reciprocity principle we discussed earlier, is that customers who receive a free item will be willing to pay more for it later. You can use freebies in order to make consumers aware of your product, if they like it they will happily pay top dollar for it later.
Giving away freebies is an excellent way to boost business and to foster the relationship between you and your customer base. Consider integrating freebies in to your next marketing strategy.
