Customer Retention: Are Freebies Good for Your Business?

It’s October and Halloween is just around the corner, and we all know Halloween means piles and piles of free candy. Free candy is usually a good thing. When I was growing up, my grandpa Tommy had a whole bread box brimming with full-sized candy bars. My sister and I put away at least 3 bars a piece before he would get wise to us.

As much as I adored that free candy, I’m not so quick to grab a sucker when I’m at the bank or a butterscotch disc when I visit the insurance office. I know there are people who enjoy a nice Dum Dum, but does free candy really do anything for customer retention? How is it possible that one cinnamon disc is going to sell me on a lawn mower?

I’m speaking metaphorically, of course. The point is whether it’s candy or a free or discounted product or service, you’ll want to be careful what type of customers you’re attracting. It’s true that nothing grabs eyeballs quicker than a big “FREE” sign, but thinking long-term, what is the lifetime value of customers like that? There are a few things to consider prior to offering freebies to unleash the masses to come banging down your door.

Can You Afford It?

Most business owners can’t afford to run around throwing out offers for free products or services. Do the math; is there a guarantee of a profitable return or at least the strong potential for referrals? If not, resist the temptation to offer freebies at all costs.

What Keeps Customers Coming Back?

It’s people who perform services. The freebie is simply an attention grabber. They do nothing for customer retention. A business retains customers by servicing them with a personal touch and not because of a free sample. Show your leads you care by resolving their issues and fixing problems they mention in their feedback. If they stick around, offer some type of incentive; incentives are delightful. Just remember: your incentive should be something that lasts longer than candy.

When Freebies Are Used Correctly

A good freebie gives your business something in return. Whether it’s a long-term customer or a brand boost, there are several creative ways that freebies can result in a long-term increase of sales. While a promotional pen is always handy in a pinch, why not give your customer something that will actually make them want to return over and over again?

Dollar Shave Club has figured out a way to generate new customers and delight everyone; they provide a free handle when a customer pays for a monthly razor cartridge subscription. It’s a low rate, so the lack of upfront cost to get started is very attractive. Another way to incentivize people to your business is to offer a trial.

PATLive offers a 14 day free trial for anyone interested in a live answering service. It’s completely free and allows for plenty of opt-out moments. When people are on the fence about a product or service, something like a trial can be the difference between a new customer and a lost opportunity.

Not all freebies are a good idea, but there are plenty of ways that companies can offer some type of incentive that fits their business model and allows for a long-term and mutually beneficial relationship.