Business Strategies

How to Make Money Giving Things Away

Written by Anna Lempereur for Gaebler Ventures

What is freeconomics and why is freeconomics rising? How can your business make money by giving things away for free?

It is extremely simple to get free items these days.

People have the opportunity to get free cell phones, free coffee, free food, and free hair products. Although you might think that companies that give away free products might be losing money, they are in fact typically making more money than their peers who never give anything away for free.

"Freeconomics" is the secret to their business strategy, and here's how it works.

How Businesses Make Money by Giving Things Away

When an individual tries something and likes it, they will often be a repeat customer. Someone may try a mocha iced coffee from Dunkin' Donuts on "Free Iced Coffee Day," and continue to come back to purchase that same mocha iced coffee they enjoyed. A consumer might also receive a free sample of Herbal Essences shampoo in the mail, and be so pleased with the results that they buy a full-sized bottle the next time they go to the store.

Consumers may also buy things to go with their free items. For example, suppose an individual receives a free razor from a stand at the mall. They will need shaving cream to go with it, right? It's just another way to increase the scope of your brand, as consumers may be forced to buy additional products to accompany their freebies. When someone receives a free cell phone, he will only be able to use it if he purchases a monthly plan.

Why Freeconomics is Gaining Momentum

This strategy of "freeconomics" is growing as a result of new Web technologies. The cost of doing business online is extremely low, and will soon be nothing at all.

It is the fastest way to attract a mass audience, and has become the best place for entrepreneurs to sell. Web sites like Google and MySpace have advertised music and games that give consumers the incentive to go out and spend money on even more songs and games of similar nature. The Internet is the most competitive market. For instance, look at Yahoo Mail. It provides unlimited storage, while YouTube gives users unlimited bandwidth. Consumers are going to continue to use Web services that are available for free, which will eventually make many paid Web services obsolete.

Once a customer is using your services for free, you may be able to upgrade them to a paid or premium service. This is often called a "Freemium" strategy.

How This Can Benefit Your Company

It's simple. Just follow the trend of giving away free items, and your consumers will come back to you if your product is worthy.

If you are selling video game consoles, give away free games. Your consumers will feel like they are getting a great bargain, and you will be making more money. Make sure you are in a secure financial situation and can afford such an endeavor, however, before you begin to give away items for free.

Handing out complimentary samples is also a good strategy. When consumers realize how much they like your product, they will keep coming back to buy more.

Most big-name companies are known for giving away free things (Starbucks, 7-11, Pantene Pro-V, etcetera), and it has been proven that this strategy can make businesses very successful.

Anna Lempereur is a freelance writer interested in writing about small business. She is currently a Journalism major at the University of Albany in New York.

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