There are a number of key problems with giving away freebies. During the initial stages of your business, it can be quite tempting to provide products and services for free. The assumption behind this is that once you get your offering out there, people can use it, hopefully like it, and then come back for more.

Studies have shown that freebies do not always result in a sale, which implies that you may be doing nothing more than just giving away a product than seeking a potential customer. This has a high probability of landing you in a bad debt as you might not get the expected return from giving away freebies.

When a free product is paired with an expensive product, consumers assume that a product is worth more had it been offered at a low discounted price instead of being offered for free. People use prices as a sign for value and so value things more highly if they are more expensive or costly to get a hold of. Clients understand when they’re getting a quality product/service FOR cheap and when they get a product/service that IS cheap. If customers think that your product is cheap, they may be wary of returning.

Are Freebies Doing Good?

This only works for very few products and services. ‘Free’ is not a great marketing tool that many businesses and entrepreneurs have been led to believe.

There are certain situation where giving away stuff for free has a positive impact. Freebies as a part of donation or for charity are considerable. There are certain objectives that make a business successful, but you need to analyse if giving away free stuff is the way to go on about achieving these goals.

This marketing strategy only works for certain target group of consumers. Young people who don’t have money are also delighted at an idea of receiving free products or services. So if your target group is to reach out to young consumers, offering free products/services would be the obvious effective way. The key is to match your freebies with your target audience. 

People Value What They Pay For

When we pay for something, we are more inclined to want to get the full value from it. The more effort and money that is invested in a product/service, the greater the value it will hold for a client.

Offering freebies, even for a short time or in a limited version, certainly has monetary costs. It also requires careful preparation which involves investment of time and money. But when it’s the other way round and a client has invested money and effort in a product/service, it is more likely to hold value. They are more likely to turn up to an event without fail and on time or own the product with more pride.

Things that are paid for and better still if they are expensive, are always associated with big or better brands. It makes the item feel more exclusive. Also, because not everyone can afford it or has it, it only adds more value. Money is a hard earned commodity, so people assume that if something costs a lot, it definitely is worth a lot.

Moreover, people always assume that there’s a catch to it when provided with freebies. This in turn affects how much they value your product or services. There are also many instances when freebies are provided but people fail to turn up for events or use those products.

At Northants Accounting, we shed more light on this topic for businesses to gain a better understanding of why giving away product/service free of cost can cost them in return.

So, contact us and we will help ensure that every single penny you spend, is worth it!

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