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How you can turn free into profit

By Pauline Muindi | September 22nd 2021

One of the most powerful marketing techniques is giving away your products or services for free. The technique has been used successfully by Facebook, Google, LinkedIn and many others. Many software companies offer a freemium version or a limited trial period to draw in new customers.

The freemium model allows users to utilise basic features of the software for free, then charges for upgrades. A free-trial period gives users time-limited access to all the premium features of a software. If the users want to continue using the features after the trial period, they have to pay.

While this marketing technique is most common in the digital space, it also works for businesses that sell physical goods. In 1895, a 40-year-old King Gillette invented the first disposable shaving razor blades. In the first year, 1903, Gillette sold a measly 51 razors and 168 blades.

In the next two decades, Gillette grew exponentially. The success of the company can be attributed to one thing: the power of free. He sold his razors to the army at massive discounts so that they could be given to soldiers. He did the same with banks where the razors could be given away with new deposits. He also approached other companies to bundle their products together with his razors. You could get a free Gillette razor with anything from chewing gum, tea, coffee, marshmallows, and spices.

Gillette only gave away razors, which were useless by themselves. By doing so, he created demand for his disposable blades. Now Gillette is the world’s leading brand in safety razors and shaving supplies. Other companies across the globe have copied Gillette’s marketing strategy with great success.

One of the reasons “freeconomics” is an effective marketing technique is the psychology of reciprocity. Once you give someone something for free, they feel compelled to give something back to you. Shoppers who get a free sample might feel obligated to buy the product, which might end up creating brand loyalty.

However, this marketing strategy isn’t for everyone. Let’s discuss how to make this marketing technique work for your business.

Give something of value

While many businesses have had success with various “freeconomics” tactics, many haven’t fared so well. Why is that?

Well, for the technique to work, the product or service should be of high value to the customer. It should result in high customer satisfaction, which means they’ll be more willing to buy it after the free sample, and even recommend it to their family and friends.

Many businesses make the error of giving a free sample or freemium product that gives the customer little satisfaction. That can end up being frustrating to those customers – which doesn’t give them a positive association to your brand.

If your free product has low conversion rates, it is time to think about what value you’re giving to customers. That said, to should still be careful not to offer too much for free. After all, you’re in business to make profits. For example, if you are selling a freemium software version, don’t include too many features. You don’t want customers to be overly satisfied with that version.

Predict a customer’s lifetime value

To determine if you should give your product or service for free, you should first calculate the customer’s lifetime value. Customer lifetime value is the total worth to a business of a customer over the whole period of their relationship.

Don’t give your highly valuable products to customers who are unlikely to have high lifetime value. However, you can offer more valuable free products and discounts to customers with high lifetime value. You should be careful to only give free samples to your target market.

For instance, if you are selling an expensive perfume, it wouldn’t make sense to give free samples to people in low-income areas. While they might enjoy the product and some might even buy it once or twice, they offer little lifetime value. Identify which customers are more valuable to your business and target them with more valuable free or discounted products.

Measure the success of your campaign

As with any other marketing strategy, create ways to effectively measure the success of your freebies. Before you even implement the technique, you should define your objectives. Do you want to create awareness, social media following, or increased sales?

With that in mind, you can now come up with metrics to determine the Return on Investment (ROI). Measuring e-commerce conversions or in-store purchases can be simple with the right tools. You can also ask customer for feedback about the quality of the product and their satisfaction, which can help you with product development and other marketing strategies.

In conclusion, remember that utilising the power of “free” is all about balance. To execute this marketing technique effectively, you need to determine how much you should give for free, identify high value customers, and create ways to measure success.

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