free to be free

Chris Anderson’s new book, Free:  The Future of a Radical Price, is on the top of my to-read list.  oh-yes-its-freeBased on BusinessWeek’s review, it sounds like a provocative read about the how economy and technology have evolved the concept of Free.

Although I suspect the text speaks primarily to Free content and online services/software, I believe the value of Free has changed for all businesses — and since I primarily work with consumer-targeted and/or retail brands, I wanted to share some thoughts about the new Free for these kinds of companies.

The recession has changed many of the rules of business and offers of Free products or services have certainly become much more commonplace lately. My own thinking about Free has changed as consumers’ expectations have changed (see “related posts” below for some of my past postings on the topic.)

While I used to view Free primarily as a desperate and damaging crutch which only lazy marketers pulled out in a last-ditch effort to stimulate purchase, I now see its value as a useful and necessary tool for business.  With consumers now trained to expect Free, companies must meet those expectations somehow.

Here are 2 ways to do so that make the most sense to me:

  • risk-reduction — The introduction of a new product/service/experience, or the introduction of a new brand itself if its completely new to the market, inherently involves some amount of risk for the prospective customer. A free sample or introductory offer is an effective way to reduce the risk of trial.
    This is particularly important if there are already entrenched players who enjoy strong customer loyalty — you must give prospects a reason to trade-off the thing they’re satisfied with and risk not being satisfied by trying your offering.  Free is the ultimate risk-reducer.
    I recommend using a sample which provides enough of a brand experience for the prospect to appreciate the value of the new offering — but you don’t have to give the whole/full offering — in fact, it’s probably better if you don’t (to manage not only company costs but also customer expectations).  Also I recommend providing the option for an instant upgrade or at least employing a limited-time bounce-back mechanism to encourage conversion from trial to purchase.
  • reward — Your most valuable customers deserve to be treated differently and giving them something Free is one way to communicate how much you value their business.  A free gift with their purchase or a surprise upgrade are effective tactics — perhaps you might even just give them something Free just because (a Free product or service on their birthday, for example).
    Importantly I recommend rewarding only those customers who are most valuable to you. Giving something away to everyone indiscriminately detracts from its perceived value — not to mention being a drain on company profitability. Also the reward should not require any extra effort or money on the customers’ part (i.e., traditional customer loyalty programs.)  As any etiquette expert will tell you, ‘thank you’ should be said genuinely and without strings attached.

I’m not quite as sure about the value of Free as a:

  • relationship builder — Some companies use Free as a way to start relationships with customers — that is, they use a Free offering as a way to hook people into providing their contact information or signing up for something they else.  While I understand the desire to initiate relationships, I’m concerned that such tactics might seem under-handed.  I suppose if it’s done with full disclosure and is completely voluntary for the customer, that’s better.
  • random act of kindness — With the exception of Ben & Jerry’s ice cream (whose brand values include “random acts of kindness”), I’m not sure if giving away Free stuff randomly makes sense.  It may have some value as a publicity stunt, but I doubt it builds any long-term brand equity — and it’s a sure fire way to raise the marketing ROI red flags.

All in all, Free should not be used repeatedly or over an extended period of time.  It’s a short-term tactic, not a long-term strategy.

As I’m sure this is a popular topic, I’m eager to hear your thoughts on the above and on Free in general — please comment!

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