Free Products, Better Business
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Overview
"Free" is the a new way of advertising for companies. After decades of adverstising, business's are finally using the concept of giving away "free" products and making money off of them at the same time. Chris Anderson explains how companies are offering their products close to free or even free in the article “Free! Why $0.00 Is the Future of Business.” When companies give away their products for free they create a demand for their product. The concept is to give away a product that people look mostly at its price and in return get money for other products attached to the free product. The idea that you could make money off of giving away products for free used to be an off the wall statement. Today, a lot of companies make their money by giving products away for free. On average companies that give away samples give away 5,000 to 20,000 samples of a product being promoted. Companies don't directly make money off the samples they are giving away but in return they are getting customers to try out their products and hope they like them and want to buy more. It's a way of free advertisement. This way of advertising is commonly used to promote and advertise new products that people haven't tried or convince people to switch brands, such and pepsi to coke or camel cigarettes to marlborol cigarettes.
Examples
- Give away a cell phone and sell the monthly plan.
- Sell videogames consoles for cheap and in return you will make your money by selling expensive games.
- Sell CD's for cheap and get more people to buy expensive tickets to your concerts.
- Install expensive coffee makers for free and sell the expensive coffee.
- Sell movies for cheap but make the popcorn and pop expensive.
- Give away free samples at a grocery store and hope people will like them and buy more.
Free Business Models
- “Freemium” is web software and services that have some free content to users of the basic version.
- “Advertising” is free content, services, software, and more that is free to everyone.
- “Cross-subsidies” are free products that entice you to pay for something else and are free to everyone willing to pay eventually in one way or another.
- “Zero marginal cost” are free things that can be distributed without an appreciable cost to anyone and are free to everyone.
- “Labor exchange” is free websites and services that are free to all users since the act of using these sites and services actually create something of value.
- “Gift economy” is everything is free, be it open source or user-generated content, it is free to everyone.
History
The whole concept of giving away free products and making money all started with an inventor by the name of King Gillette. Gillette was a salesman who sold cork-lined bottle caps and right when he was about to give up on his inventions, his boss suggested that he invent something that people use and then throw away. Gillette was shaving one day when he realized that he needed a new razor because he couldn't sharpen his anymore. He then thought of the idea to make blades that were cheap and could be thrown away. He invented this blade you could throw away a couple of years later but at first they were not a very big hit. Gillette started to sell the razors in bulk to banks to give away with new deposits. The razors were given away with gum, tea, spices, and coffee which created a demand for them. The more people used them and threw them away the more razors were needed. Thanks to Mr. Gillette people accept the fact that you can actually make more money in the long run by giving your products out for free.
References
Alissa. "Why Companies Give Away Free Samples." <http://freesamplesdirect.com/blog/why-companies-give-away-free-samples/>. Anderson, Chris. "Free! Why $0.00 Is the Future of Business." Wired 25 Feb.2008. April 2009 <http://wired.com/print/techbiz/it/magazine/16-03/ff_free>. Christensen,Gary. "Make more Money by Giving away Free Samples." 03 July 200. April 2009 <http://www.businesstoolchest.com/articles/data/20000703103908.shtml>. Wright, Ian E. "Why Do Companies Give Away Free Samples?" <http://ezinearticles.com/?Why-Do-Companies-Give-Away-Free-Samples?&id=436650>.