Who doesn't love free? Particularly when you least expect it, getting something for free makes a deep impression. Starbucks was giving out free samples of their 'Refresher' drinks a few months ago to pedestrians on the street. I never would have ordered a full price drink myself had I not been lured by the free sample. Likewise, my husband visited Michael's Jewelers at Parkwood Place many years ago and was not charged for his watch battery replacement. This simple act brought my husband back a second time and, along with great products and service, turned him into a repeat customer.
In the world of business, not everything should come with a price tag. Free gifts, samples, or special deals like two-for-ones help move products into the hands of potential customers giving businesses a chance to prove their worth and hopefully build a life-long relationship.
How do you determine a safe monetary value to offer free to customers? While you want the incentive to truly compel customers to visit your business, you shouldn't have to offer so much that it hurts. One way to determine a safe value for a free incentive is to identify your 'lifetime customer value'. This value represents a business's profit from a single customer over the total lifetime of their relationship. For example, a family may spend $2000 having their home carpets professionally cleaned over the course of a lifetime. A carpet cleaning business offering free carpet cleaning of a customer's first two rooms could potentially turn a $50 free offer into a lifelong customer worth $2000 in the long run.
While figuring out the 'lifetime customer value' is important, it is also necessary to make the free offer scalable. It wouldn't be prudent, for example, to advertise a free service limited to one particular month. 100 people could take you up on your free offer and you wouldn't be able to accept any other paid work. Being able to scale back or schedule the free services around paid services will keep the offer from being too onerous to fulfill.
Offering something for free to a customer when a mistake has been made is also a great way to build repeat business. I've always believed that it is never good enough to just correct a problem in business without rectifying the inconvenience of the mistake to the customer. This week alone, I've had to return expired salad dressing to a grocery store, a pair of jeans to a clothing store- the electronic garment protector had not been removed by the cashier-, and school supplies that I was overcharged for. None of these mistakes were mine; they were due to a staff error. Unfortunately, although the returns took up my time, vehicle fuel, and effort, the various staff members simply fixed or reversed the error. If any one of the businesses had offered me something for free, in light of the inconvenience they had caused me, our business-customer relationship could have been strengthened. What a missed opportunity.
Offering free products and services can be an effective strategy in creating lifelong customers as long as the offer is meaningful, scalable and in line with your 'lifetime customer value'. Until next week, stay in the black and keep coming back.
