Why “Free” is Costly

Why “Free” is Costly

Why Free is CostlyPeople often perceive “Free” to be valuable. Who would turn down free stuff? If I discount my product, they’ll love me and then buy more, right? People may love you and your product for awhile, but setting up your core offering to be less than it’s worth sends the message that you don’t value your own product.

When I started working with Golden Bears and Pandas Athletics, one of our marketing tactics was to give away tickets to students. The thinking was that free tickets would attract attendance. Students would come, love the games, and return again and again. In reality, more people didn’t come. On average, only 10% of the distributed tickets were used. We were sending the message that our product wasn’t worth much more than $0. For ticket holders, if the free admission wasn’t used it was no big deal. Our attendance actually rose when this activity was stopped.

Recruiting international students at the University of Alberta presented the same problem. Recruiters (and I was one of them) were very excited to tell people all over the world how affordable tuition was. But it turned out that our graphs, charts, and key messaging communicating that tuition was significantly cheaper did not result in an increase of overseas students. What we quickly discovered was that parents directly equate lower tuition to lower quality. They were certainly not willing to send their young Einsteins from Singapore or Brazil to a perceived lesser school, despite the quality of education being equal to or better than other options. Ultimately, international tuition was raised, thus better matching dollar value to overall value.

So, when you’re thinking about giving away something valuable, consider the following:

  • Treat your core offering like gold. Don’t give it away, discount or devalue it. When people choose to pay for the experience, they will see greater value.
  • Provide periodic extras or thank yous. Customers will appreciate the gesture while continuing to respect the value of your core offering.
  • Communicate your value. Emphasize to customers the value of their relationship with you; then tell them the benefits they are getting for the fair price they are paying.

Ironically, focusing on eliminating “Free” from your marketing vocabulary, will make clients value you even more.

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