Unpopular Opinion: "Give Value for Free" is Bullshit More Often Than Not

[jpmartin]

they have a product problem.

In regards to Newton... was it a product problem or a pricing problem. I presume that if they followed Bear Notes subscription pricing model of say, $14 per year... *maybe* they'd see 10x the numbers subscribe...

 

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[Nigel B]

I'm in the software industry - Freemium, Try-Before-You-Buy, you name it is central to this industry. Without a way to try the product (or online service) for free, you incur much higher sales and marketing costs. So there is a place for free in our world.

The place free does not seem to work, to me, is in the Guru space. Experts who have a huge range of expertise to offer do not need to provide it to free, for anyone, as their reputation proceeds them (and was probably built in a salaried position in industry or education before they set themselves up as a guru).

One-trick pony gurus have a real problem though. They have to give away for free what they put in other materials (hving followed other gurus advice to re-package and re-purpose) - but the game is transparent. One book purchase, and they are done.

Then there is celebrity 'free' value - building followers, and using them to generate revenue usually through JV type arrangements. Well the sheep who like to follow will buy the clothes and shoes of celebrities with no problem, so why not their cleaning service, chiropractor and dentist. Point is, the celebrities who offer free stuff (Oprah I'm looking at you) can afford to do so, and and usually only promoting a product the third party knows how to sell.

Giving stuff away sells nothing - selling is what sells. Either the product/service sells itself when exposed to the prospective buyer (MJ's backtesting service) or someone has to sell once they have a contact created by an exchange of details for access to something of value (which means it was not really free anyway).

As MJ's books say - it's all about the value created for the other party.

 

[MJ DeMarco]

In regards to Newton... was it a product problem or a pricing problem

Yes, could be a pricing problem ... a Corvette is a nice car and a good product, but not priced at $250,000. The pricing is the problem, not the product.

4 million subscribers says there is some value there. Really hard to believe they could only grab 40,000.

I would have not shut that down, it's still $2M a year, unless they were blowing through big support costs.

And the larger question, why not sell it? Surely it had to be worth something!

 

[jpmartin]

And the larger question, why not sell it? Surely it had to be worth something!

Thought the same... but hey, you can always ask the founder who knows he might offer it to you! And you can turn it around by getting the pricing right! Having used Spark... I dont see how Newton can charge for a multiplatform email app. But Readdle's strategy with Spark is clear... make it a free product and sell other apps. Newton is a one trick pony, with one app. Begs to ask the question... would giving away one product, to charge on another be the solution? I honestly dont know...

 

[AgainstAllOdds]

Doesn't this answer the question and verify what I'm saying? 3,960,000 ppl thought the "value" was worth ZERO. Only 40,000 thought it was worth something.

So if you're giving away something that isn't terribly perceived as valuable (meaning, they can get it elsewhere as good and at that price) then yes, FREE isn't going to work.

Once again we're dealing with companies that aren't productocracies ... they have a product problem. And companies with product problems are subject to the whims of their marketing.

One of the problems I want to point out is that the freemium model for Newton Mail created significant opportunity cost for the founders.

You have smart founders that could have built anything else with their time.

By going with the freemium model, they delayed the eventual receipt of feedback ("hey, your product will never make you money because you can't sell it at a price that will cover costs and leave you with a profit").

They went in this direction:

• Free --> Freemium --> Dead.

If they tried to charge right away they could've went in one of these potential directions:

• "Premium" --> Dead.
• "Premium" --> Freemium --> Dead
• "Premium" --> Profit
• "Premium" --> Freemium --> Profit

In this scenario, charging right away would have been a lot more efficient for the founder's net worth.

There's nothing worse than having 4 million people tell you you're awesome, and then waste years on building something that none of them would pay you for at an economically viable price point.

 

[sparechange]

In my e-commerce brand I've done give aways reaching thousands of people yet have gained 0 sales from that (in fact lost money and time)

Considered it as a strategy to grow online traffic which failed massively hurray!

It is a good lead generator though to send out offers

 

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[ChrisV]

There is a very sound psychological principle behind free samples -- it's just just "giving value" or generating goodwill. The idea of reciprocation is the basis for some of very large enterprises; entire religions, cults and charities have been based on the principle. I wouldn't knock it.

Yes, this is correct. For more specific information look up “Social Reciprocity." Like I was saying regarding Robert Cialdini's research into reciprocity (among other researchers,) doing a favor for someone triggers strong feelings of indebtedness and trust.

There was an experiment where waiters gave customers a tiny mint at the end of their dinner.

Sweetening the Till: The Use of Candy to Increase Restaurant Tipping, Journal of Applied Social Psychology

A common practice among servers in restaurants is to give their dining parties an unexpected gift in the form of candy when delivering the check. Two experiments were conducted to evaluate the impact of this gesture on the tip percentages received by servers. Experiment 1 found that customers who received a small piece of chocolate along with the check tipped more than did customers who received no candy. Experiment 2 found that tips varied with the amount of the candy given to the customers as well as with the manner in which it was offered. It is argued that reciprocity is a stronger explanation for these findings than either impression management or the good mood effect.​

DOI: https://doi.org/10.1111/j.1559-1816.2002.tb00216.x

But there’s another benefit:

The first principle is reciprocity, Cialdini said. This is a simple quid-pro-quo relationship where people feel the need to return a favor. Everyone has encountered this with the "free sample" marketing campaigns or the "free trial."

Logically, that leads into the next principle, commitment, according to Cialdini. Once someone is hooked on a product, it's easier to get him or her to commit to paying for it. When people decide or promise, they tend to stick to their word, according to this principle. If that commitment ends up being out of line with their internal beliefs, people tend to rationalize or change their beliefs to be in alignment with that choice, he said. This is also the basis of the low-ball approach favored by car salespeople, according to Cialdini, who conducted research early in his career suggesting that a preliminary decision to take an action tends to persist even after the costs of performing that action have been increased.​

And this is all aside from the fact that Sampling your product can potentially get them hooked. In every novel purchase, there’s often no way of knowing if you’re going to be ripped off or not. Sampling mitigates that risk. I heavily use Reciprocity to my advantage in business and interpersonal relationships.

Effects of a favor and liking on compliance, Journal of Experimental Social Psychology

Link: https://www.sciencedirect.com/science/article/pii/0022103171900254


TRUST AND RECIPROCITY: AN INTERNATIONAL EXPERIMENT

Link: http://www.utopie.it/documenti/documenti_esd/trust_and_reciprocity.pdf


Harvard Business Review: The Uses (and Abuses) of Influence

Link: https://www.hbr.org/2013/07/the-uses-and-abuses-of-influence


I mean you don’t have to give your first born to your customers, just a small favor. Make them feel special and make them trust your product.

 

[Solais]

I think it has less to do with social reciprocity (give away something for free -> people become "indebted" to you) and more to do with trying to sell a product in an extremely saturated/competitive market.

Let's not kid ourselves - 80%+ of guys age 18 - 34 want to sit at home and play video games/shitpost online and collect "passive income."

I see the same effect among real estate agents; the ones who do extraordinarily well give away lots of free information/knowledge to potential clients BECAUSE it is the one convincing factor aside from "word of mouth."

Seems to be happening in software as well, with all the "free trials." Back when the software industry didn't turn everything into an awful "subscription," you simply read an online review, bought a CD from a store like Circuit City (ah, the good ol' 90's) and that was it. Wish that came back TBH.

 

[Real Deal Denver]

There's another piece to the puzzle here as well...

It's possible that because this offering was free to being with, the company essentially "anchored" their customers to the free price point. In other words, customers perceived the value of the product as $0 simply because the company had told them previously that they were pricing it as $0.

In negotiation, it's often said that to break an anchor (generally, a price anchor), you want to reframe the product or concession being discussed. For example, I once took a few articles that I had originally posted on my website and turned them into an eBook, which I sold for about $5 in the Kindle.

I sold many thousands of them. But, had I instead put a "Pay to Unlock This Content" button on my website to for people to get access to that articles, it's likely I wouldn't have gotten any sales. Content on my site has always been 100% free, so people will feel ripped off if I start charging for it. But, by reframing the context (taking the info off the website and selling it on another site), I was able to break the anchor and change the perceived value.

Going back to the software being discussed above... I don't know if they tried this or not, but my guess is that if they had packaged the software differently, added a couple new features, changed the name or whatever -- in other words, reframed the offering -- they might have been able to do a better job of breaking that $0 anchor their customers had to the product, and gotten more conversions.

You're totally wrong @JScott. I know the info you put out. I have both of your books. I bought them because they give me at LEAST 1,000 times more value than I paid for them.

But I don't have to tell you that, of course. You market the way I do. Let the freebie seekers spend their time scouring the internet for free info. They know what their time is worth.

You put out awesome material, and you attract "serious" customers. I don't remember what I paid for your books. Maybe $20 each? Wow. If someone won't swing $40 for the benefit of years of a man's knowledge, maybe they're cut out for a career at McDonalds anyway...

In your case @JScott, don't waste your time courting the deal seekers. Your subject matter is the very antithesis of cheap/free anyway. Now for all that great advertising, I'll be looking for a one dollar coupon off your upcoming book! You got my address...

 

[Boo]

Thank you for the kind words!!!

But, you sort of validated my point here! Much of the information in my books is available for free on my website, but if I just started charging people $20 to view my website, they wouldn't pay it -- they've been anchored to paying $0 for information on websites. But, because I reframed the offering (I put the information in books and sold them on Amazon), I've convinced 100,000+ people that the information is worth $25!

Crazy thing is, other people take the exact same information, put up a stage, grab a microphone and convince people the information is worth $20,000.

I don't think this can be overlooked. It's the same reason that my girl likes to shop online, for the experience. She looks through the clothes, makes the sale online and in her mind, the excitement bubbles up, she receives the package, opens it up and fights through the luxury black wrapping and custom postcard they sent her, only to get to the handbag she bought.

She could have got the same bag instantly in the store, but the experience has value. It's not just the product that you receive. It's the same reason I like to go to a certain bar to order a generic beer, because the product isn't just the beer, it's the entire experience.

There's something seemingly more valuable about a book than an online pdf. It feels secretive, exclusive and a seminar is only more so.

 

[Nigel B]

It's possible that because this offering was free to being with, the company essentially "anchored" their customers to the free price point

And this is how so many internet startups kill themselves.

They start a free thing, scale their customer base, need to pay for resources which the investors no longer want to be funding and make a clumsy attempt to monetize.

Compounded by the issue that a second (third, fourth) startup - usually funded by a different crowd - are now offering virtually the same thing for free ... rinse, repeat.

I guess the 1-in-10 still works out, or the VC model would have collapsed - but it seems this failure model is really prevalent in narrow scope services on the internet.

 

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[ChrisV]

I know that this opinion on this forum will be unpopular, and that it goes against what all the gurus teach, but after years of reading stories of misled entrepreneurs, I needed to make a post.

Also, with the original post, I feel like maybe there’s a specific situation he’s referring to. Like a freebie situation gone awry, and maybe in that specific situation giving away value wasn’t the best idea, but in holding a microscope to that micro problem gave it a macro appearance.

I think you also have to be smart with what you give away for free, and it’s really context dependent. And I also think your intentions matter. Like @Andy Black says “Just help people.”

If you’re not really trying to help them, or if you have some angle or ’trick up your sleeve’ people generally sense it. And now reciprocity doesn’t work because what you’re giving them no longer represents something of value. It represents to them a token of manipulation. Reciprocity only works when they feel like you’ve actually given them something of value. Like back in the day in NYC what panhandlers would do was run up to your car and just start washing your windshield. Then out of obligation people would gave them $5 or whatever, and some people would just tell them to f-off even after. they did it. They made it illegal because it was such blatant manipulation.

But that actually brings up a perfect illustration of reciprocity. There are tons of street performers in NYC who just stand there and do performances and get legitimate reciprocal payments. Like Elmo or the bleeping robot in Time Square:



They have a cup next to them. You’re not required to put money in it. But some of these guys make six figures I’ve heard. No one is required to give any money. People just feel like they’ve been given value, so they give them money. There is no requirement. A few of my favorite public speakers have turned to this model. Author Sam Harris, Dr Jordan Peterson, Joe Rogan, and they're making millions. By putting out free content. Do I suggest this model? Maybe not. But it illustrates a point.

But for your standard business, the bottom line is you have to make people really want what you’re selling. You have to make them believe believe they’re on fire and you have the water.

There are a number of ways this can happen in practice:

• Their friends tell them ‘holy crap, you really gotta try X!’
• They’re a repeat customer who has already purchased from you
• They try a sample and really like it.

They have to believe that they’re not going to hand you a $20 bill (or $100, or wire $1000) and gonna leave feeling ripped off. They don’t want to feel like a sucker. So trust is huge.

But that being said, I think the. OP makes a valid point. You gotta know when to pump the brakes. I mean you’re not running a charity.

You need to have a product or service that is valuable enough for people to give you money. The book Ca$hvertising puts it best: For someone to give you $20, they have to believe that the $20 they're giving you is worth less than what they're getting. If they believe they're getting $30 worth of value then they'll give you money with zero hesitation.

I agree but I would say take it a step further and make them believe they’re paying $10 for $100 worth the value. And even better better... actually do it. I aim to give my clients $1,000 worth the value for every $100 they spend. When you do that, they become repeat loyal customers and tell all their friends.

But on a customer side reciprocity is strong. When I go to Costco and they have all those free samples, I always say to myself "I’m not gonna buy anything I’m not gonna buy anything I’m not gonna buy anything.. I’m just gonna try it”.. and then i try it and then i feel like a grub for taking free shit and end up buying one lol.

People are a lot more generous than the self-interest model would predict.

 

[Nigel B]

I agree but I would say take it a step further and make them believe they’re paying $10 for $100 worth the value. And even better better... actually do it. I aim to give my clients $1,000 worth the value for every $100 they spend. When you do that, they become repeat loyal customers and tell all their friend

(I've not read Ca$hvertising - the quoted ratio may be relevant to a specific market covered by that book. If it's focus is a $20 advertising spend generates $10 profit after all other COG, overheads, etc. - but for product/service to price ratio I think the following is more realistic.)

10:1 is high, but much more likely to get a bite than 3:2 ($30 value for $20 spend).

The reason is that in order to overcome buyer hesitation they have to be sure of the value of their spend. Early in the relationship they are only working on your reputation - as well as they can figure that out - and your claims. So they need to believe they will get massive return, in order to take the risk - thereafter (assuming you prove your value the first time out) that ratio can close.

Hence the 'guru' model which walks people from a $97 course, to a $500 course, to a $2000 event and then a $10K 'inner circle' - each time narrowing the value to price ratio.

The ratio also very much depends on the product or service of course. If the product is genuine dollar bills - the ratio does not need to be anything more than 1.01:1 assuming a zero cost transaction for the buyer. Point is, certain products (more so than services) do not need to offer a 10:1 leverage - but I think the minimum perceived leverage which is likely to move people from skeptic to first-time-buyer is not usually less than 3:1 and normalling the range 5:1 - 10:1.

 

[ChrisV]

10:1 is high, but much more likely to get a bite than 3:2 ($30 value for $20 spend).

I aim to do that. Whether that actually happens or not is debatable. But I agree. As long as you're offering $1.01 the value for $1, people will buy*. But the higher you tilt that ratio in the customer's favor, the higher the velocity they will throw their money at you. When you bump that ratio up high enough, that's where you start getting people camping overnight to get your product.

*i have to make a footnote here because there's also opportunity cost. Yes, they'll buy something worth $1.01, but if there's someone else offering something worth 1.02, they're gonna jump on that deal instead. The big lesson is to boost that ratio as high as you can without incurring losses from elsewhere. This is signifigantly easier to do with scalable businesses.

 

[Nigel B]

Yes marginal value premium creates marginal loyalty for sure.

 

[Real Deal Denver]

You're totally wrong @JScott. I know the info you put out. I have both of your books. I bought them because they give me at LEAST 1,000 times more value than I paid for them.

I have no regrets buying your books. They provide solid value.

But, you sort of validated my point here! Much of the information in my books is available for free on my website, but if I just started charging people $20 to view my website, they wouldn't pay it --

I could (and do) spend years searching the internet for free information. I know I could dig up information for free there. On the other hand, I can read four books in a month and go from 0 to 60 and break records. I'm a serious player. In fact, the thing I don't like about the internet is how it sucks me in and I end up spiraling off in some interesting direction and waste hours. Yes, I learn a few new things - but I have to have discipline. I could spend days in the vast sea of information on the internet. That's great, except I have a list of things to accomplish. Discipline. Your books "inject" the knowledge into my brain directly. That's worth a LOT.

But I don't have to tell you that, of course. You market the way I do. Let the freebie seekers spend their time scouring the internet for free info. They know what their time is worth.

But, I will be checking out your website anyway... Wish I had more time. If you knew the hours I've been putting in the past few months. I've accomplished a lot - but - I might just quit and take two full time jobs instead. I'd make more money and work less hours. No kidding there.

Despite the great information on the net, I can't stay in the warm up area forever. I have to take make that move and step up to the home plate and hit the ball. Out of the park. Hopefully. {sigh} I like having the odds so much more on my side from the things I have learned from your books.

But, because I reframed the offering (I put the information in books and sold them on Amazon), I've convinced 100,000+ people that the information is worth $25!

Um. Wow. I guess THAT was the push I needed to confirm that I really do need to get to work on my own books. Next time you're going to hit me with a truck out of the blue, warn me first.

This was great information. Almost fainted though...

 

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[MythOfSisyphus]

I think when it comes to informational products, giving away value is huge. Most of the courses, educational books, ebooks etc that I've purchased have been because I was already familiar with the creator/author and had already been exposed to many of their best ideas and concepts for free.

Even if you give away your absolute best information for free, people will still buy your course or your book because you've proven you can provide more value than others in the same niche, and for all they know the rest of your course/book/whatever will be even more valuable.

This website is a great example of giving away free value. You can guarantee that millionaire fastlane and unscripted have been purchased by thousands of people who otherwise wouldn't have purchased them without first coming to this site for all the free value it provides.

 

[Everyman]

Using your own words. More often than not, you are absolutely right.

Would you agree it comes from the fact that 80-90% of people we meet, aren't even vaguely interested in what we do, not to mention, what we want to sell to them. Unless we approach them and start talking to them. Then we may see that, still 80-90% isn't interested, but 10-20% is. But we have to go through the 80-90% to find the 10-20%...

I think it's industry specific. Somebody has mentioned before drug dealing. So low-cost, astronomically high-margin product. It was made to be 'marketed' this way. It might work better or worse in different industries, with different products.

99% of people will only give you money for FUTURE value. They don't give a f*ck about what you did for them for free before.

It might build trust actually. Trust is more important than anything else, I think. I don't buy things that I don't trust, don't buy things from companies I don't trust and people I don't trust. I am ready to pay high premium to anyone, who I know is trustworthy i.e. will deliver what he promised in time he promised (even the time is not that important in some cases).

I saved a former mentor of mine millions of dollars by optimizing his supply chain. I fell into the trap of giving value away for free, assuming that eventually he would reciprocate. You know what I ended up getting? Not sh*t - because there was zero reason to give me a dollar other than "loyalty".

Somebody has already brought up the book "Give and Take". Don't want to duplicate it here. Just a couple of questions. Did you ask him for anything in return? Did you negotiate it before or even during this process? Did you give him 'something small' for free before committing to this huge deal? What was the relationship like before this deal?

End of the day, it's a marketing tactic. It is not the only way to operate your business, and more often than not, it does more detriment than good.

You're a freelancer?

What's better? You writing a thousand forum posts here and on Quora? Or you creating a strong landing page and cold emailing a thousand potential clients with a few clicks?

I don't know what's better. That's for you to test and decide. But if you bet you whole business on just one tactic instead of trying multiple until you get traction, then you're an idiot and deserve to fail.

To summarize: Create a valuable product or service. Employ a multitude of tactics to get traction. More likely than not, giving value away for free is bad for your business.

You are absolutely right. It's one of the tools to use to 'sell'. Just one of many that should be used alongside others (emailing^^^, cold calling, 'social media', etc etc)... But giving away value for free isn't always bad, it's just not properly used in a specific situation.

 

[Thomas Baptiste]

I have been conflicted about this topic for so long but it actually makes logical sense now. Thanks for clearing that up.

 

[maikooo]

Great post! Thank you ...

I fell for this, totally. Worked our a$$es off for a year providing as much value as possible in terms of valuable content on various networks. The plan was clear, modeled after favorite podcasters I followed in the past.

1. build the community by providing as much valuable content as possible before charging
2. charge sponsors for the access to our audience and charge the audience for added-value products/services

The biggest risk was only related to the fact that our audience doesn't have much disposable revenue. The industry is prone to it.

Completely dismissed the need for actually validating the need (pun intended). Completely disregarded the fact that our "potential" competitors have this type of content only as part of their outreach strategy. Basically threw my Lean Startup Build-Measure-Learn training out of the window and went head in.

My partner mentioned that we shouldn't focus our business model around this, but I was too swept away by the success of star podcasters getting 10'000 downloads per episode. WTF, they are charging $500/episode, 3 sponsors each, 7 days a week. WTF*2, that's almost $50k/month. Patience and persistence will get us there ... well, after 10 months we barely had <1'000 downloads/views per episode on pod & YT. Ain't nobody pay high CPMs on that one.

Anybody who has tried a content type of business knows that sponsors may try with you out of respect/curiosity and a good pitch but they will only renew if you deliver numbers. The latter was simply not there. The audience doesn't care. We just haven't skewed value towards our offering in an immensely overcrowded industry filled with free content on every corner.

Well, in the end, we made some money to pay the bills, combining all kind of income streams, however, haven't created a system. We failed all the commandments at once.

The lesson is simple; create as much free content as you have resources for and makes sense from ROI, but only as part of your marketing strategy, supporting sales of your offering that addresses tangible pains - either by attracting new customers (SEO, trial) or increasing the perceived value of your offering

The new framework is clear; create product(s)/service(s) that address real pains, provide immediate value exchange ($) and have inherent scalability in them. Content & Community are layered on top of it, not at the core of it.

Hope this helps!

 

[McFirewavesJr]

Every time Wikipedia begs me for money, I think about this. I can't help but think: "Not my fault if you built something cool no one wants to pay for."

It also feels that many tech companies that survive on investors money preach that modus operendi since they get massively successful despite the math not working. At least in a conventional manner.

Sent from my SM-G925W8 using Tapatalk

 

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[James Klymus]

While I do agree that for some businesses, Giving free first would be silly (Like the cookie example you used). But business doesn't happen in a vacuum, and it isnt a black and white thing.

For some businesses it can work really well. Especially when it comes to info marketing and even consulting. For example, when I first started working out a few years ago, A few people I knew talked about Greg from Kinobody having really good programs. So I checked out his youtube channel for a few weeks and saw that he had some awesome content and knew what he was talking about.

He even sampled some of his workout routines on his channel. I ended up buying his "greek god" program and he has a happy customer, because he let me "see behind the curtain" of his courses and I wanted more. And I know greg does very well with his company Kinobody.

I mean even MJ samples his books. He lets you download some chapters for free, and you'll probably buy the whole thing.

It isn't a black and white answer, and of course a bakery giving away all of it's cookies for free is not smart. I even think that particular example is silly. But in some businesses, Sampling the product can lead to sales, like it did in my example.

 

[McFirewavesJr]

Wikipedia raises about $50M per year in donations. Don't assume that everyone feels the way you do.

Let me rephrase: I don't want to pay for it. On the other hand, I gladly donate to blogs and creators I like. Maybe it's just their begging tone that annoys TF out of me.

 

[Mckenzie]

I know that this opinion on this forum will be unpopular, and that it goes against what all the gurus teach, but after years of reading stories of misled entrepreneurs, I needed to make a post.

Time and time again I see people following this business model:

Give value for free --> People will eventually start paying you. --> You'll be rich.

The theory preached behind this "model" is that to make money, you have to give people value (upfront). You give them value. They understand your worth. And then if they so choose, they'll give you money.

Ok. Nothing wrong with that. However, I want to point out that this model is nothing more than a funnel. It's a marketing tactic.

It has a lot of pitfalls and potential traps for starting entrepreneurs.

For the majority of businesses, it is not a "business model" that you want your business to be centered around. It is one of many tactics that you want to try out before deciding where to allocate your sales/marketing budget, but not something that you want to bet the house on before looking elsewhere.

The biggest problem with the model is that it comes with the requirement of giving value upfront. You give before receive. In a large number of scenarios that could work, but there's one key point that this sort of thinking leaves out:

99% of people will only give you money for FUTURE value. They don't give a F*ck about what you did for them for free before.

Let's go through an example of a bakery in multiple scenarios:
A bakery wants to sell more cookies. To sell more, they have a person stand outside giving samples away.

Scenario #1 where things go well:
Because enough people try and taste the samples, a few realize that the cookies are good, and end up buying a dozen cookies each to take home. The bakery is ecstatic and considers it a success. They end up building their entire business model around giving away samples for free.

Scenario #2 where things go bad:
People try the cookies. Eat as many as they want. End up buying no cookies because they already got their sweet fix for the day. Tomorrow, or whenever they choose, they know they can get another cookie for free, so they end up buying none. The bakery goes bankrupt and the people feel bad, but not to the point where they'll donate to open the bakery up again; they'll just buy they cookies from now on.

Scenario #3 the default scenario without samples:
A bakery puts great looking cookies in the window. Whoever wants cookies, comes and gives them money for cookies.


Using this example above, gurus will tell you that Scenario #1 is the only way that you can build a business. You need to give value upfront before having a chance to receive value.

Bullshit.

Scenario #3 is the most common scenario for a reason. How many of your local bakeries are giving away top quality samples all the time for free? They might do it once in awhile, but there's little to no chance that they're doing it everyday, and if they are, they're only giving you a taste.

This is the same reason why Groupon doesn't work for most businesses.

Or why all the Youtube gurus like @AndrewNC that make videos for free end up getting zero customers. Edit: Alright, maybe they end up getting two or three and then start calling themselves successful entrepreneurs.

It is merely a funnel/marketing tactic for you to get sales.

But to get sales: YOU NEED TO CREATE FUTURE VALUE.

You need to have a product or service that is valuable enough for people to give you money. The book Ca$hvertising puts it best: For someone to give you $20, they have to believe that the $20 they're giving you is worth less than what they're getting. If they believe they're getting $30 worth of value then they'll give you money with zero hesitation.

The only time you should be giving value for free is when you're attempting to increase the perceived value. If you know your service is worth $30, and you're selling it for $20, but no one's buying, then giving away a TASTE for free is worth it to increase the perceived value from let's say $10 to $30.

But if you're giving value away for free, expecting the customer to eventually pay, then you're mistaken.

I saved a former mentor of mine millions of dollars by optimizing his supply chain. I fell into the trap of giving value away for free, assuming that eventually he would reciprocate. You know what I ended up getting? Not shit - because there was zero reason to give me a dollar other than "loyalty".

I have friends that have invested years into the wrong pursuits. I've read countless posts on this forum of people betting their business around these tactics and then wondering why they failed. Time and time again I've seen this model fail.

End of the day, it's a marketing tactic. It is not the only way to operate your business, and more often than not, it does more detriment than good.

You're a freelancer?

What's better? You writing a thousand forum posts here and on Quora? Or you creating a strong landing page and cold emailing a thousand potential clients with a few clicks?

I don't know what's better. That's for you to test and decide. But if you bet you whole business on just one tactic instead of trying multiple until you get traction, then you're an idiot and deserve to fail.

To summarize: Create a valuable product or service. Employ a multitude of tactics to get traction. More likely than not, giving value away for free is bad for your business.

I recently listened to a podcast where the guy talked about "seeds of discontent" and how charity or freebies can in fact become toxic by leading to complacency, and resentment among the very folks you intended to help. The moment I heard this while running in the morning, I stopped and contemplated on this. It resonates with me a lot when I looking back at my life and those people around me both in personal and business life.

 

[MrChill]

I can attest that trying to monetize my YouTube channel with 75k subs is like pulling teeth. People want the free content and that's about it.

Congratulations on working hard and hitting 75k! What product/service and how have you been trying to convert them into paying customers?

I think freebies have a valuable place in the toolkit, when used properly. Costco, a business that most customers absolutely love, give away countless freebies each year in the way of samples. They know that when people are exposed to something new and novel, and that the quality is solid (Costco's corporate buyers don't buy garbage from suppliers), people will buy! The cost of these samples or freebies is nominal to Costco relative to the number of new sales they'll make.

Likewise, Evernote and many other Freemium SaaS companies have such nominal incremental costs to add a "free" user. They know that once I put 100's of notes in their system, I'm not going to easily jump ship when I finally outgrow the free subscription. They know I'll open my wallet for the value proposition of a few bucks for month, given all the extra features and storage I get.

 

[banjoa]

Ben Settle seems to agree with OP.

 

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[Johnny boy]

My lawn care company:

In the winter I offered free lawn care for people.

Most of them signed up for our premium plan in the spring.

Average profit per contract: $1000 a year + lifetime value if they stay with us.


My web design and marketing company:

Talked to people over the phone in long conversations and gave away all of my best advice for them to grow their business. I’d tell them most of what they were asking me to do wouldn’t actually help and would just be a waste of money to pay anyone for.

They’d send me $1000 for a two hour conversation.


What is content marketing?

How do people become celebrities in the first place?

Why is Gary vaynerchuck bigger than all of the social media “gurus” out there?

Giving for free works. Ask Facebook.

 

[itfactor]

A little late to the party.

As a freelancer who is always on the fence on this issue, I think its important to distinguish one fact.

Giving value and demostrating value aren’t the same thing.

Using the cookie store example. Instead of giving away free samples to passerbys, demostrating value can be holding community baking classes for local families.

At the end of the day it’s about identifying what qualifies as value, extracting maximum benefits for both you and your prospects, without reducing your business into a charity.

Also, what makes something valuable can come from the opinion of those that surround us.

Instead of focusing on delivering value to just your prospects (free cookie samples), think about how you can offer collective value to a market (teach families how to bake).

 

[LittleWolfie]

Giving value and demostrating value aren’t the same thing.

Love this quote, and this thread.

 

[FierceRacoon]

At one point I taught social dance (Argentine Tango) for a new studio. The studio used promotions on living social heavily and attracted lots of bargain-hunters. On the surface it was successful, as the owner was able to keep renting three huge studios at a prime location in New York City. However, the model was not sustainable as he had to keep offering promotions.

We would sell 30 passes for a series of classes, and maybe 1 person would stay long-term; more often than not, nobody would. Instead we'd see those people who didn't care about learning as much as they cared about bargains. They would take Salsa-1 at one studio, Salsa-2 at another studio, and if there was no deal for Salsa-3, they would take Swing-1 or whatever else was on sale.

At some point we wanted to do a student performance group that would rehearse once a week. We wanted them to pay about $40/month... and that was a deal-breaker! I believe that not a single one of the ten or so interested people was prepared to pay. The going rate for regular classes was like $14; our charge was completely symbolic, yet those people weren't prepared to pay. They wanted to pay $100 for a year of unlimited classes and then they would come and really take whatever there was, indiscriminately, without much regard for learning.

In the end the whole thing collapsed. The owner made other mistakes, but that was a part of the problem: we had effectively selected a very cheap group of people that was immune to any attempts at upselling. It was not just that we were giving value away; we were attracting the wrong kind of people who absorbed the value much like people take free cookies. It did work in the sense of filling the studio with people, but dance studios don't survive on this kind of clientele; we had to transition not to charging those people more money, which was impossible, but to attracting a different kind of people.