FREE is the New Business Model.
Yes, it sure would cost a lot of money for a restaurant to give away a thousand free lunches in a week. Maybe four or five thousand dollars, but if that Free lunch is really, really good and hundreds of those people convert to regular customers then I can assure you that the customer aquisition cost is much lower with that method than through most other advertising approaches. Any business could ‘borrow’ this idea. Darn few ever will.
Now, let me tell you about a Supermarket that stole this idea. For their new location in a new neighbourhood, they gave away 5,000 litres of milk, 5,000 packs of butter, 5,000 cans of peaches and 5,000 packages of napkins.
How could any business afford to do this? This Supermarket printed out 5,000 coupon books – each with 4 coupons – one for a free quart of milk in week number one, one for a free butter in week number 2, etc. No purchase was required to redeem the coupons. No strings attached. That’s courage.
They mailed these coupon books to 5,000 selected families near the stores location. Over 3,ooo coupons were redeemed the first week. Nearlt 4,000 by the fourth week. Almost every person also bought groceries while they were there.
The fifth week with no coupons and also no newspaper advertising, no radio advertsising, no TV Advertising, no billboard advertising, over 4,000 people shopped in that Supermarket spending a total of more than half a million doollars that week.
3 Comments to “FREE is the New Business Model.”
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Great example of creating an instant loyal customer base….
Do you think a service based business could emulate this example? In many cases, once the service is complete, that’s it – repeat business *might* happen, but it may be years down the track…
Thanks for that Kelsey. Thats where it gets interesting. Have a read of our post http://handylocals.com.au/blog/2010/07/19/a-real-business-offers-more-than-one-product/ . Many businesses lose out on so much potential revenue by not looking at what else they can sell to their New, loyal customers. I have heard of plumbers offering products to their customers at a great rate (free!) (which of course will need their services to install) or a Free Plumbing Health Check or JV with another company to offer related specials eg with “$50 Coupon” from local plumbing supply shop.
i think if business combined buy 1 get one free purchase along with coupons they would get loyal consumer base and also some money towards the costs they have incurred.