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The Benefits of Free by Susan Payton

Free business modelsIf you think giving away the farm won’t help you get more customers, think again. More and more businesses are offering free products or services while still increasing their bottom line.

Why Go Free

Most people are reluctant to pay for a product if they aren’t sure of the quality. That’s where a free sample or trial comes in handy; there’s no risk to the consumer to try something, and if they like it, they’ll end up becoming paying customers. It’s win-win for both customers and companies.

Free Business Models

Your company has several options when it comes to offering free products that attract new, paying customers.

There’s the freemium model, where you offer a version of a product (usually software) with limited features. Customers who want the full range of capability will have to pay. One company, 37Signals, is a leader of the freemium movement. Their three productivity tools—Basecamp, Highrise, and Campfire—all offer free versions with limited storage or number of users. The company doesn’t loudly announce its free versions, but if you look carefully on the pricing pages, you’ll see them.

Mailchimp is another example of a company using freemium. It offers a Forever Free account, which is ample for most small businesses, but it does a good job of showing you what you’re missing. You want to pay for your subscription so you can get all the cool features the email marketing software offers.

Then there’s the free-with-paid-shipping model. Vistaprint is a great example of this. While customers can get free business cards from the site, they do pay for shipping. It’s a great option for small budgets, in that there’s really no risk in getting free business cards, even if they do pay shipping. It’s also great for your business because it’s a way to build customer loyalty and a long-term relationship. When that customer is ready to go beyond the free product option and spend a bit more, chances are, they’ll come back to you.

Free trials are also popular with subscription services and software programs. Amazon offers a 30-day free trial of its Prime program, which offers free two-day shipping, access to free movies, and the ability to borrow books from the Kindle Lending Library.

And finally, free shipping is another marketing tool many businesses use to draw in customers. They may include the shipping cost in the price of the product, but customers still feel like they’re getting a deal and are more inclined to buy.

How to Go Free

If you’re considering offering your product or service for free, take a few things into consideration to make it work to your advantage:

  • What is the average lifetime value for your business’s customers? In other words, what does an average customer spend over the length of your business relationship?
  • What features could you cut out to offer a freemium version that would entice customers to pay for the full version?
  • What is the average conversion rate for customers moving from a free trial to the paid version of a product or service in your industry?
  • How can you benefit from offering free products?

Consider a trial run of offering a free trial or other free version of your product. Pay close attention to what your customers do with it. What percent turn into paid customers? Are you spending more time providing customer service to the free customers than makes fiscal sense? Reassess your efforts after six months to determine whether this is a viable long-term strategy. You may just find that offering something for free increases your bottom line.

Interested in learning more about where digital marketing’s headed? Register to receive a special report I’ve produced in conjunction with hotel marketing firm Vizergy, “Digital Hotel Marketing in a Multiscreen World.” It’s targeted specifically at hotel and resort marketers, though the lessons also apply to just about any business. You can get your free copy of the report here.

And you might also enjoy some of our past coverage of pricing and how to make it work for your business, including:

Susan Payton is the President of Egg Marketing & Communications, an Internet marketing firm specializing in marketing communications, copywriting and blog posts. She’s also the founder of How to Create a Press Release, a free resource for business owners. She’s written three books: DIY Press Releases: Your Guide to Becoming Your Own PR Consultant, 101 Entrepreneur Tips and Internet Marketing Strategies for Entrepreneurs, and contributes to several sites, including ChamberofCommerce.com, The Marketing Eggspert Blog, CorpNet, Small Business Trends, and BizLaunch. Follow her on Twitter @eggmarketing.

Tim Peter

Tim Peter is the founder and president of Tim Peter & Associates. You can learn more about our company's strategy and digital marketing consulting services here or about Tim here.

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