One of the most popularly discussed business concepts is the concept of Freebie Marketing especially coming from the example of Gillette, a major brand of razors and blades owned by Procter and Gamble. So, what is freebie marketing and how can start-ups benefit, if at all?
Simply stated, freebie marketing is a method by which one good is either sold at a lower price or given away for free in order to increase the sales of a complementary good. King C. Gillette is known to have capitalized on this concept to the best possible extent which is why it is often believed that this concept came into existence because of the Gillette Company, which is not true.
So how did this start?
The concept is popular thanks to Gillette’s statement, “Give ‘em the razor, sell ‘em the blades.” In 1901, entrepreneur King Gillette from Fond du Lac in Wisconsin noticed that most barbers in his area used razors that had large bolted blades, nicknamed cut-throat razors. While the razors were great, the blades wore out soon and hence needed frequent sharpening. Thanks to King Gillette and his entrepreneurial mind, he developed a new type of razor that had a handle with an easily replaceable blade.
What was more interesting is the way he priced this. He sold the razors at a significant loss in order to gain customers while making money with the sale of blades which were sold at a premium. This is exactly where the “Freemium” pricing model also gets in. A lot of businesses, especially digital and mobile based, are using the freemium model to attract customers.
Today, Gillette’s razor and blade pricing model today is applied to a number of industries – mobile phones and service plans, inkjet printers and cartridges, gaming consoles and games, etc. Say, for example, Telstra will sell you a 32GB Apple iPhone 5S for only $36 a month for 24 months which comes to $864 instead of the regular $999. But at the same time, you’ll have to take a service plan that costs a minimum of $45 a month and hence the total cost of the device is $1944 or almost twice the price.
This is something start-ups with new revolutionary products can do in order to get more customers. The freemium model or freebie marketing is a great method to get customers to try your product and thus understand them better. While you are at it, here are three things you should keep in mind while opting for freebie marketing:
Don’t give your best stuff for free
Well, your bestsellers will always sell. Do not make the mistake of giving it away for free. While this might seem a nice way to woo customers and gain brownie points, it will not help in the long run.
Know your potential customers
What is the purpose of the freebie? Who are you targeting? Make sure you know the answer to these questions as it will help you identify your audience well and shape your freebie marketing accordingly.
Your freebies should resonate with your brand
Make sure your freebies match your brand which means if you are a fun, quirky startup make sure your gifts also show the same.
Hope the above concept of freebie marketing and the 3 tips help you gain success with your product. Do let us know what you think, we’d love to hear your success story.
Image Credit: Luca Graziani