Teriyaki chicken sample anyone!
As the holiday season was in full swing, most of us probably passed by the "teriyaki chicken sample" person in the mall while shopping - well, at least I did several times. What got me thinking while waiting was the fact that this is probably a well known 'freebie' to anyone - but how many other kinds of freebies are out there and how and why companies manage to give stuff away sometimes for no apparent reason - unlike teriyaki chicken samples some freebies are more obscure and it is close to impossible to understand why companies do it - especially when they are supposed to maximize profits - it is a market economy after all. Several days later while researching for the marketing plan I stumbled on an article that provides some insight on the above paradox - in .
What it essentially boils down to in terms of the "why" part for freebies is the BIGI model which includes the following as the article describe:
Brand building ("B" category)
The first category of freebies provision is the best known and although it includes a number of variations, was collectively named as "brand building". We found that there were two major scenarios for businesses offering freebies to consumers in the retailing industry sector:
1) sales promotion (including new product launch or promotion of existing products); and 2) the building of brand loyalty.
Income generation ("I" category)
The second reason behind the freebies provision phenomenon is for generating income for companies. Industries who adopt advertising income as their main source of revenue are the major freebies providers who fall into this group. The majority of those companies are media, publishers or dotcoms, which can assist the advertisers to reach a wide coverage of consumers.
Government legislation ("G" category)
The third reason for providing freebies by companies is to comply with government regulations in exchange for the right of doing business in that area. This category is usually found in the media and telecommunications industries. A typical case in this category is the Kiwi Share protocol signed by the New Zealand Government and TCNZ. Telecom agree to offer free local telephone calls to customers in exchange for the right to run the (privatised) national and international telecommunication business in New Zealand.
Information gathering ("I" category)
The final reason for providing freebies - and of most concern to the freedom and safety of the individual - is that it allows companies to collect information about customers which can then be sold or passed to others. The more accurate the information, the greater its value to purchasers who then have a targeted database which will yield a higher response rate and sales, for example, does this person own a boat and if so what size is it?
Who pays for freebies?
The study found that there are different parties who pay for freebies. In the brand loyalty and sales promotion (B) category, the costs of free giveaways are paid for by manufacturers, but not the wholesalers or distributors, in the expectation that these costs will be recovered by future sales. For example, the airlines offer free air tickets to their loyal customers, the cost of those free tickets is paid by the airlines themselves, while the companies expect the cost to be covered by future sales or to be offset by the reduced marketing expense of attracting new customers.
In the income creation category (I), the cost of free goods or services that companies offered to customers are paid by the advertisers (which is different from the other categories), for example, the print and electronic media provide free newspapers or web sites to readers, but charge advertisers for advertisements within those same media.
The research also found that in the government regulations (G) category, the cost of free goods or services provided to customers is paid by the providers themselves or through government funding. Similar to the situation in the "B" category, the providers expected the cost of freebies to be covered in future sales or, more importantly, offset by other products or services, such as national or international telephone charges.
In the final category - information gathering (I) - the costs are eventually carried by the customers who are plagued with unwanted junk mail or telephone calls to their home, and possible fraudulent use of credit cards or wholesale identity theft.
Cheers and Happy New 2009 to everyone.
SOURCE:
Hi Yulian,
I recently heard a comedienne say "I love free stuff; I don't care how much I have to pay for it!" That about sums it up! It is a great marketing tool in many circumstances. As I mentioned in a previous post, my youngest son loves to go online and request free samples of anything he thinks he would like to eat. Then of course, if he likes it, he reminds me to buy it next time I go shopping. (My kids always seek out the free food if we're out shopping. Even though I never do, the "marketers" still get to me via the kids.)
Happy 2009!
Dori
Posted by: Dorianne Lefebvre | January 06, 2009 at 10:47 AM