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Why Can Giving Stuff Away for Free Benefit Your Business?

Every business is different. They sell different products and services to different customers, in different locations, and at different prices. Their teams will be structured differently, their processes and systems will be bespoke to them, and they’ll compete using their own USP. Not only that, but they’ll have to be different tax rates and conform to different regulatory standards, depending on where they are based. 

Yet, despite all these differences, every business shares one common objective; they must generate more cash than they spend. Even if they’re a not-for-profit, they still need a surplus to be able to pay the bills and keep the lights on. 

While you can generate cash in the short term by attracting investors, the traditional way of doing this has been to generate a profit from every product or service sold. So if you’re a greengrocer, you might buy bananas for $0.10 and sell them for $0.20, while a furniture store may buy a table for $100 and sell it for $250. 

Yet, there is a growing trend for businesses to give away things for free, whether it be information, products, or services. This approach clashes head-on with the traditional way of thinking about business, but for many entrepreneurs, free can actually be very profitable. 

The Try Before You Buy Approach

The first way that many businesses give something away for free is by using the “try before you buy” approach. It comes in a few different forms, but they all have the same principle — they let the product or service do the talking.

If you’re a Costco shopper, you’ll have almost certainly stopped to try one of the many free samples that the company’s employees hand throughout its stores. As you try a sip of this drink or a nibble of this new snack, you’ll receive a small sales pitch on the merits of the product and its price. 

Costco has calculated that the cost of the freebies it hands out and the time of an employee are worth less than the increase in sales of those particular products. In fact, some reports suggest free samples have helped to increase sales by up to 2,000%. Not only that, but the company sees the free samples as a part of the overall customer experience, along with its cheap hotdogs and bulk-buying options. 

This is try before you buy in its most primitive form, but there are other ways businesses can deploy it. 

Online casinos sometimes use free spins as part of promotions. This lets players try out one video slot game to see if it’s one they enjoy before they start playing more. Free spins can also be awarded during other circumstances too, such as as a reward for a completed challenge in an eligible game, adding to the overall experience like Costco does with its samples.

Free-to-play games like Call of Duty: Mobile and Candy Crush also work in a similar way, offering their games for free but also offering players the opportunity to buy additional in-game content such as extra lives, character customisations, or new features. 

Software companies also use free trials that are either limited by time or number of uses to let their customers test out the product to see if it’s right for them. Sage is one example of this. It offers a free trial of its Sage Accounting, Payroll, and HR subscriptions so that a business owner or employee can check the features meet their needs before committing further. 

Giving Away Expertise

The traditional way of doing business has been to keep your skills and expertise a secret since you need them to earn a living. For example, a painter might not share the techniques they use to get a smooth finish for fear of a customer doing it themselves or a competitor copying them. 

Today, though, savvy business owners and marketing professionals have identified a way to give away some of this knowledge for free to help attract more customers. 

This is why makeup artists give free tutorials on YouTube, its why solicitors take to TikTok to explain the basics of common legal disputes, and why digital marketing companies publish blog posts explaining how many keywords you should focus on. 

The owners of these businesses understand that customers that were always going to take a DIY approach would have done it anyway, regardless of what they did. However, by providing this content for free, they can demonstrate their expertise to customers that might consider hiring them. 

The Completely Free Service

Some companies have seemingly made their entire business out of giving away a service for free. You almost certainly use at least some of these everyday, as they have become household names. 

Facebook, Twitter, Snapchat, TikTok, Google, and Reddit have all developed business models where they give away their service for free. They remain immensely profitable though, as they sell advertising space to companies instead. These ads then appear in your newsfeeds, before and after videos, and in search results, each one earning a small chunk of revenue that adds up quickly thanks to the hundreds of millions of users that these services have.

This post contains affiliate links. Affiliate disclosure: As an Amazon Associate, we may earn commissions from qualifying purchases from Amazon.com and other Amazon websites.

Written by Marcus Richards

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