How to Pay for the Free Lunch Consumers Want

On the Internet, There Are No Free Lunches

The free lunch concept arose in the late 1870s as a way to fill saloons and sell alcoholic drinks by giving away meals. Today, the Internet gives new meaning to the words “free lunch” as in without cost. Whether free lunch refers to shipping and handling, which shoppers take as given for online purchases; content, which readers expect from established media entities and other content sources; or advice from experienced individuals in the form of information and/or guidance for specific business challenges; participants expect not to pay in any form.

Steeped in this sense of free lunch, a recent LinkedIn request pushed the boundaries of acceptability. Seeking an experienced New York City based loyalty marketer, the request stated that this person should be amenable to doing this work “pro bono in a pay-it-forward kind of way.”  Talk about a free lunch! A paid consultant wants someone to help a client make money without any form of compensation! How does this make financial sense?

7 Ways to pay for the free lunch

Fast forward to today’s wired world, where consumers expect firms to give them a free lunch in the form of a variety of services. The reality is that these “free” items aren’t free for the company that must cover the costs for these offers. Therefore, like the free lunches of yesteryear, businesses must find other ways to pay for these items. Here are seven tips to support your free offerings.

  1. Set minimum order size to ensure profitability. Think about your offer as a whole. Only offer free shipping for orders that are above your firm’s average order size, either dollar order value or unit order size. In other words, have a floor on your pricing associated with free shipping. Restrict low profit margin and/or high shipping cost products from these offers.
  2. Incorporate the freebie’s cost in your pricing. Another way of covering the expense of the products or services you give-away is increasing the prices of the rest of your offering. This requires that you understand your cost structure. This doesn’t work for all product types, especially ones where competitors have the same or parity products for the same price or less.
  3. Expand your shipments’ ability to generate revenue. Include offers for related products in the shipment. Think broadly about how you use package inserts. You can add third party advertisements for a fee. Understand that this is a strong endorsement of the advertiser.
  4. Add advertising to your content. While consumers claim that they don’t like advertising, they accept it. Consider experimenting with different formats to determine which works best for your content and audience. If the content is your site such as a blog, it helps if you personally endorse the product(s).
  5. Incorporate affiliate offers. Affiliate deals generate revenue for content providers in the form of a revenue share and can be used for a wide range of products. These work best in the context of relevant content. Be aware that you need to have a disclaimer according to the FTC.
  6. Get a sponsor. Find a company or individual who will cover your content creation costs or other fees in exchange for being exposed to your offering’s audience. This works well for books delivered free via Kindle, subscriptions or webinars.
  7. Build your housefile. Give away content in the form of e-books, white papers and webinars, to generate leads. This works well for B2B firms and consultants because you’re giving prospects a sample of what you do. Since participants receive something they view as valuable, at a minimum, you’re able to build an email or physical address file that you can promote later.

Regardless of how you do it, your firm must pay for your consumers’ free lunch or you’ll loose money. The challenge is doing it in a way that provides a fair exchange for both your target market and your company.

Do you have any other suggestions for how to pay for these modern day free lunches? If so, please add them in the comment section below.

Happy marketing,
Heidi Cohen

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Photo credit: Andrew Hayward via Flickr

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