Fast Company

Free Lunches

When companies offer us, of all people, something for nothing, we wonder: What's the catch -- or, for that matter, the business plan? So we asked actual experts -- Ben McConnell, author of Creating Customer Evangelists (Dearborn, 2002) and Jennifer Rice of Mantra Brand Consulting -- to assess a few high-profile giveaways. How do we know they're working?

Company: Starbucks

Giveaway: Free living room; the opportunity to lounge for hours in comfy armchairs.

Pros: 33 million folks stop in weekly. Average tab for those who buy: $4.

Cons: Open-door policy exposes stores to freeloading riffraff.

Philosophy: "Creating a 'third place' away from home and work is intrinsic to who we are; it's not a marketing add-on," says a spokesperson.

Expert verdict: Winner. "If all customers wanted was good coffee, Dunkin' Donuts would be the number-one coffee vendor," says McConnell. "Starbucks knows it's about the community experience."

Company: Tivo

Giveaway: In December, TiVo offered DVRs to customers of rival Comcast who brought cable bills and a gift for charity.

Pros: People came in droves, hauling off nearly 2,000 DVRs.

Cons: TiVo ran out of DVRs and had to turn potential converts away; others got recorders only to find the promised rate wasn't offered in their area.

Philosophy: Give them the hardware and make them service customers for life.

Expert verdict: "Short-term giveaways generate buzz, trial, and referral," says Rice. "But they're only effective when the service is worth talking about and the promotion is done well."

Company: Skype

Giveaway: Unlimited free Internet-telephony service when calling within the Skype network.

Pros: 38 million users in almost two years -- including 1.3 million who pay for premium services such as voice mail.

Cons: Dude, it's, like, free.

Philosophy: "We want customers to tell their friends, family, and colleagues about Skype," says a spokesperson.

Expert verdict: "This strategy is often useful in subscription or commodity industries," says Rice. Skype's is "a brilliant viral strategy," says McConnell. "To use the service for free you have to get others to use it."

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