Everyone see's it pretty much everyday, Free trial, free sample, free products/services. Why is giving free stuff away lucrative in the long run? People would think twice when they have to pay for some new service or product that they are buying, if it's not something they have bought in the past. To lure a person into trying out what you are selling, many will agree that giving away something is a way to attach a person to what you have to offer. People will probably not think twice if something is free, right? Most people think, what do I have to lose and will then pursue what is offered. Say you are giving away product x, but that product only lasts for a week because it is a trial, so that boils down to you having a week to capture the customers mindset into wanting the product.
Free stuff is a big marketing factor because it's a real deal when you pay for nothing and enjoy the cream of the crop. Many times products given away for no charge is CHEAPER than paying for advertising and recovering it from your profits. Also, verbal communication can boost your exposure because it is more likely that people will tell others about your offering and that it's free so others will not hesitate to try your product out.
Obviously, if your product is high priced inventory, it wouldn't make sense to give it away for free. Say you are selling a new type of television. The ripple effect of giving away a TV for free multiple times, would most likely end up in you filing bankruptcy for your business. Instead, take a tactic that would boost your audience while only giving away maybe 1 TV. Create a contest, people enter their information after viewing what you're offering and then have a chance to win the product. This way you are giving maximum exposure, while everyone still has a chance to win something.
So let me leave you with this: You have to justify giving something away, so adjust your marketing strategy according to your business structure. Free is good, for customers, but you are running a business and shouldn't drive yourself into a loss. Layout some possible scenarios and go from there.
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