After many years of mulling it over, I’ve come to the conclusion that giving away things for free is a bad idea.
I’m sure that statement will sound odd or even idiotic to many people, but give me a chance to make my case.
I’m going to do it in a series of essays. This is the first one…
Free Is a Bad Idea, Part 1: Free Offers in Business
“All marketing is basically about customers and marketing and making money and capitalism and winning and promoting it and having something someone really wants.” – Roger Ailes
If you have been in business for any length of time, you know that giving away free samples – a longstanding strategy to introduce new products – is, at best, a sometimes–good idea.
It works best when the free samples are given to existing customers. The more loyal the customer, the better it works.
This stands to reason. Customers that are happy with a brand are more likely to value free offers from the same brand. They not only tend to trust the intention of the offer, they are predisposed to like the freebies.
But free offers – truly free, not “free with purchase” – to non-customers (i.e., customers) are generally less successful. They are, thus, rare in direct marketing (particularly on the internet).
There are two reasons:
- The cost of giveaway programs is usually much greater than the cost of direct sales. Therefore, they require a proportionately higher amount of spending from each customer to justify the extra expense.
- Even when the cost is not great (e.g., giveaway programs for digital products), free-offer promotions (again, truly free) don’t work because the “quality” (average lifetime value in terms of dollars spent) of the customers that they attract is generally much lower than you’d get from conventional offers.
In my early days as a direct marketer, I was a big fan of free offers because they could yield three to five times the response rates I could get from conventional offers. While the historic campaigns (that required payment) might have enjoyed an average response rate of, say, 2%, I was getting 6%, 8%, and sometimes 10%!
I considered myself a marketing genius. And when it became clear that all those additional customers I was bringing in were weak spenders, I refused to give up on my precious free offers. I tried again and again, using every possible tweak I could think of in our backend marketing. But none of it stimulated those freebie-respondents to spend more money with us.
The only thing that did work was de-emphasizing the “free” in the free offer and writing in copy that reminded people that unless they were serious about buying the free sample later, they shouldn’t respond.
That worked reasonably well, but it was basically a soft form of direct selling.
I could no longer deny the truth that kept slapping me in the face: In prospecting for new customers, the lower the price of entry, the greater the number of tire kickers and moochers you attract. If you lower the price to zero, you fill your marketing files with deadbeats that will, in time, destroy your business.
Then the Internet Happened
I learned the lesson above in the mid to late 1980s. After that, I eschewed freebie campaigns and even highly discounted offers.
But in or around 2000, the world of direct marketing changed drastically. Most of my direct-response clients and all of my publishing clients moved from mostly print promotions and products to mostly digital in the space of about five years.
In that first decade of this millennium, free offers became the dominant strategy for acquiring prospective customers. By offering digital books, courses, and periodical publications, my clients were able to sign up millions of people that had an interest in business, entrepreneurship, investing, natural health, and international travel.
The strategy was to bring in prospects with free offers and then send them “free” material that provided both information and sales messages to “convert” them to paid customers.
What we found was that, like the old days, most of these prospects never bought anything. And of those that did become paid customers, their lifetime values were generally lower.
Meanwhile, the old, direct-sales campaigns continued to work, much as they had always worked. But these programs got little to no attention because they were bringing in far fewer names.
What happened is that the cost of acquiring “free names” (prospective customers) via the internet began to climb because of market competition. Yet the value of those free names did not rise accordingly.
Meanwhile, our direct sales were still moving along quite well. Eventually, we realized – at least I did – that it would have been better for us to focus on paid offers. They always were, and always would be, the best strategy for building a sustainable business with the greatest value with the least risk.
I’ve learned several lessons from these deep dives into free-offer marketing, but the most important ones are these:
* Free-offer marketing campaigns attract many moochers. Moochers love free offers. Not just because they like the idea of getting things for free, but also because they pride themselves on getting things for free that others have to pay for.
* Free offers attract not just moochers but perfectly good customers that appreciate a bargain. But when these people respond to free offers, they instantly become less valuable as customers because people, always and everywhere, do not value what they get for free.
You cannot turn a moocher into a quality customer. As I said, I’ve tried it a hundred times in a dozen ways. It just doesn’t work. Plus, they tend to be expensive – at least more expensive than you think. They continue to be your major responders to free offers, clogging up your processing and fulfillment departments. And they tend to complain more (even though what they are getting is free), clogging up your customer service department.
You can attract good buyers with free offers, and those people will “convert” into paid customers. But because of the free offer you sent them, these otherwise good customers will be less good to you. They will underestimate the credibility of your business. They will expect less from you and trust you less, too. And they will definitely give little to no value to whatever it is you gave away for free.
This is not advanced marketing analysis. It’s human nature.
Free is, as so many marketing gurus have said, the most powerful word in selling. That’s still true if all you want to do is attract a large following of people that like getting things for free.
But if you want to build a business, you need to purge yourself of the ego satisfaction of having a huge file of “maybe” customers and focus on building the biggest list you can of real customers, customers that value your products and services and are willing to pay you fairly for them.
In Part 2 of this essay, I will talk about why I don’t like free offers in the realm of charity.