Advertising Strategies: Free, The 4-Letter Word

When working with killer whales we followed a two step formula: ask the whale to jump, feed the whale for jumping. Offering something “for free” can produce desired results, but only for the experienced trainer. If you are about do a 30-minute show with a whale and have 50 lbs of fish to use as rewards – do you think the whale will listen to you if you feed all 50lbs of fish before the show starts? What if you fed only half? I can tell you that the odds of the whale listening will be low. Offering something “for free” rarely works in marine mammal training so why would you expect it to work in your business?

I’ll Clean for Free!

Years ago when I was starting my first business, a residential cleaning company, I decided to run a special; “One Free Cleaning!” That’s right! No matter how big or small the house, we would clean it from top to bottom… for free! I figured once they saw our quality of service they would become repeat customers.

I advertised all over the island of Hawaii, and even went door-to-door promoting our special. Do you know what happened? Everyone declined. When I told a resident I would clean their house for free, they would look at me as if I were crazy and then quickly decline.

It boggled my mind. Why would anyone decline a free service? Then I remembered a story…

This one time…

A businessman in New York built program that taught people how to make money. It was a compilation of knowledge and tools you would need to succeed. He knew from years of testing, that when people used his tools and techniques as directed they could earn $75,000 a year. The program also promised success with only a part-time commitment. After decent success in smaller cities, he decided it was time to announce his program to the city of New York. He placed a full-page ad that read:

“Want to make an extra $75,000/year part-time? Call ###-###-####”

Nobody called. It was a flop. Not giving up, he decided to re-run the same ad the next month with one small modification. The new ad would read:

“Want to make an extra $20,000/year part-time? Call ###-###-####”

The phone rang off the hook.

People saw “$75,000/year part-time” and thought it was too good to be true. As they saying goes, “if it is too good to be true, then it probably is.” People could imagine making an extra $20,000 a year working part-time however, and this is what launched this businessman’s product to the next level.

I will NOT clean your house for Free!

After recounting this story I changed the cleaning special. We would no longer clean your house for free. Instead, we promoted our “$40 Full House Cleaning.”

It was so popular we had to turn away clients. Suddenly, people had no problem hiring us to clean their house. People didn’t look at me like I was crazy when I said I would clean their house for $40. I didn’t change what I was offering, I only changed what I was charging. In this day in age, “free”, is a term that can cause apprehension, instead of excitement. People can picture someone offering to clean their house for a discounted price, but not for free.

Why we Fear “Free”

People have been slowly conditioned to think of “Free” as a four letter word. “Free” is something to stay away from at all cost. The stigma of “free” including an unfavorable condition to the offer is embedded in our society. Ever since economist Milton Freidman popularized the saying, “there is no such thing as a free lunch” – we have been leery of getting something for nothing. Today our in-boxes, both physical and virtual, are bombarded with the promise of free money, gadgets, and more.

Do we ever get anything that is truly free? No. We are asked to do something in exchange for this free item – conditioning us to think of the word “free” as bait-worm on a hook. The worm may look appetizing, but you know once you bite, you’ll have a hook in your mouth. We are being conditioned to avoid “free.”

Freemium Access for All

The Big Guys Get It

Even large companies are learning from the perils of offering free services.

37Signals, a web app company, dropped their Free Plan and their revenue increased 800%. That is not a typo. Soon after, web services across the internet were dropping their Free services and seeing profits skyrocket.

Even if offering something for “Free” generates loads of potential customers, those “customers” are worth nothing unless you can convert them to paying customers. Evernote, a free organizational app, entices users with a “Free” price tag.

Evernote converts only 0.05% of their customers to a paid account within their first year. For customers who stay over a year, they convert roughly 2% to paid accounts. Is this the best possible model? This may work if you have high volume, but for a small business owner like us, a 2% conversion probably won’t cut it. For the people who do take advantage of your free offer, how likely are they to purchase from you in the future?

People Rather Pay

Businesses offer the product and consumers pay whatever they want in exchange for the item. Selling books online and employing this strategy, this company found that roughly 2/3 of the consumers paid for the product. The majority paid under $5 while 20% paid over $10. Even when given the option for a free product, the majority of consumers decided to pay. Incredible.

Take Action

When formulating your advertising strategies consider offering previously free items for a lower dollar amount. You’ve seen companies that offer their first month of service for a $1, or offer a $1 installation. Clearly these numbers aren’t making them substantial money. These companies have learned, however, that offering items at a substantial discount generates a better return than offering them for free. Doing this makes consumers feel like they are getting a deal, rather than feeling like they are getting swindled.

“Free” can have its place in business and each industry operates differently, so the best thing you can do is experiment.

• Offer free shipping on your website and see how many visitors become buyers. Then offer $1 shipping, and compare the conversions.
• For one month offer a free-consultation to new clients. The next month offer the same consultation for $20, which can be applied to their first bill if they become a customer. Compare the results and make necessary changes.

I offer a “free” guide, “9 Essentials to Launch your Business” here on Whales & Business. It is free in the fact you don’t have to pay any money for the resource, but acquiring the document requires an e-mail address in exchange. Even my “free” resource, isn’t truly free. If I gave it away, it would loose it perceived value. This way the document is exclusive and for subscribers only.

Only you know what is right for you and your business. Test different offers and keep the highest performers.

A final word; if you want to give away free hugs, go for it – but think twice when it comes to your business.