Why Freebies Can Cost You

The following article was written by A. Michelle Blakeley. She is the Founder and CEO of Simplicity, Inc., a progressive small business development firm. She manages her clients’ business expectations and prevents information overload via Micro Business Therapy™ and Micro Business Action Plans. She is featured in Forbes.com and the Financial Post as one of 30 Women Entrepreneurs to Follow on Twitter, the host of Simple Truths for Women Entrepreneurs on BlogTalkRadio.com and author of the NEW e-book: “Get it Right and Move Along… a collection of practical tips, tools and techniques for small business owners.”

Recently, Ning announced that they were laying off 70 staff and no longer going to provide their social networking platform as a freebie. Ning’s COO Jason Rosenthal said they would stop offering free services, forcing networks to either pay or move (http://ow.ly/1BNke). Although it is not unusual for us to hear about the need to downsize and tighten belts, it is unusual to hear about such a large social networking venue to suddenly charge you for what you become accustomed to and enjoyed having as a freebie.

Just what is the cost of providing services and products as freebies? First of all, just because you offer something for free doesn’t mean people will want it. Offering products and services at no cost can be tricky. Giving away products and services that you promote as “valuable” actually decreases in value the more you do it. Although one man’s junk is another man’s treasure, what’s the value in something that you can get anytime you want? Just how long can your business survive when you are giving away everything with everything?

How much is too much? What happens when you can no longer afford to give away your products and services? What do you do? Do you grandfather your existing clients with the freebies and only charge new clients? Do you abruptly stop providing the freebies and only provide the products and services that cost?

Providing sessions, teleclasses, products, books, etc. as freebies are all great ways to get your foot in the door but when it is done in excess and/or over time there are risks. Those risks could cost you more in the long run. The last thing you want clients and potential clients to feel is like they’ve just experienced the “bait and switch.”

3 ways to avoid the costly mistake of providing products and services for free:

1. Have a time limit. This will help let clients and potential clients know that it is only for a set period of time and that they can anticipate having to pay for those said products and services in the future. Even if you use the term “for a limited time” or “limited supply” it gives the viewer notice. They should understand that it might not be available or expect a cost at some point in the future.

2. Attach the free product or service to the purchase of a product or service. Create a win-win scenario by offering a “bonus” item to the purchase of a product or service. You get a sale, but the client gets something extra of value without you giving away the kitchen sink.

3. Use the free product or service as a platform they can upgrade from. Keep the freebie a bare bones type of thing and keep the bells and whistles as something of value that they should expect to pay for. Many technology platforms use this type of technique as seen in “basic, premium and platinum memberships” etc.

One final note, if you utilize and incorporate a product or service into your business that does not have a cost attached to it, weigh the pros and cons carefully and know that should the bill come in the mail one day, you will gladly pay it because it is an integral part of your business functionality and success.

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