The world of advertising and marketing is full of free goods, discounts, BOGOF and more. A classic in today’s retail world is TM Lewin, the shirt retailers, who never seem to have a day go by when there isn’t an offer at their shop or on their website. This is not desperation, however. This is strategy.

Reuben Swartz in his pricing blog argued (I paraphrase) “free is not a pricing strategy. It’s an advertising strategy, a promotional strategy, a testing strategy”. He’s right. The purpose of providing free offers, discounts, premia etc, is nothing to do with altruism or largesse. It’s to do with testing the tipping point for customers and, when found, to continue to engender a relationship with that customer.

At the end of the day, offers exist to encourage a financial response - sales. Google, a great online brand with a marketing reputation as a great altruist, appears to offer a range of phenomenal free products and services. Yet it does this for a reason: to give people a reason to come to their website, creating traffic – in order to sell advertising online.

Not many businesses are as successful as Google but all businesses can learn one sales and marketing lesson from the application of “free”. It is this: offer nothing free that does not generate a financial response somewhere which is greater than the cost to you of the free product or offer. And never let a customer think they got something for nothing – you will only encourage price buyers, cheapskates and profit drainers.

If you offer something at a discount, or for free, or with a premium, make sure the customer knows that this is because you want them to do something in return (e.g. order within 7 days). Strangely, even buy one, get one free (BOGOF) does something really odd: it preserves the FULL price of the product in the mind of the customer.

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