The Curse of Free

Posted: November 4, 2012 by Bob Gilbreath in Marketing, Startup, Technology

There are few words in our everyday lives that are more exciting than “free.” We love a free ride, free sandwich or free beer. A free sample is often the easiest way for an entrepreneur to attract new customers. But I have learned the hard way that “free” is a dangerous marketing strategy that feels good but can hurt you in the end.

A few months into launching my new research tool for startups, the Minimum Viable Concept Test, I decided that it would be a good idea to provide some free research to potential clients who could become repeat customers. I figured that a free sample would impress them and lead to ongoing business. After all, each of my other, paying clients loved the output.

My free tests produced happy customers, but none of them converted into a paying account. This was a mistake that cost significant time and money, both of which are precious for a new business.

Entrepreneurs should reconsider offering their valuable products, services and time at no cost; or at least treat this strategy with the same care as nuclear material. Here’s why free is a curse:

  • Free doesn’t weed out the disinterested. There are lots of potential customers for your product, but not all of them are ready and willing to pay. Unfortunately, when you offer something at no cost it is too easy for them to say “yes.” That means you end up attracting customers that never had an interest or intention of buying.
  • Free warps the value equation. No matter what your pricing sheet says, when the client pays nothing, they can’t help but expect to keep paying nothing. They are happy with the transaction, but when you come back with a purchase order for the next one, the client feels pain.
  • Quality of service can suffer. There is a natural temptation to put less effort into the customer who isn’t paying you a dime. When two emails hit your inbox at the same time–one from a paying client and one from a free tester–which one do you answer first? The paying client’s message, of course. This can add up over time, further weakening your odds of turning the free account into a paid customer.

Instead of free, why not offer an initial price break? This helps grease the wheels while still establishing the “real” price in customers’ minds. I have had even better success by including something of added value on top of the usually priced package. This feels like a discount, but offers you the chance to introduce an even better output.

Better yet, try offering a free sample that costs you nothing. To sell my research service, I will often share examples of reports that I have run on other companies (with their permission, of course). These reports clearly show value and help customers see what it could do for them. You can do this with useful content in the form of white papers, blog posts, and public speaking.

It actually feels good to offer free work to a prospect to get the ball moving, and this can be a very easy sell. Meanwhile, it is painful to hold firm to a price when a potential customer is staring you in the face. But “easy” has never been the path to startup success. Let a “no” sink in and reassess whether your product is priced and positioned the right way. Sometimes it just takes time for your prospect to realize how much they really need you, and they will come calling back later.

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