Why do companies give away free samples?
Almost all of us have experienced it.
From that friendly salesperson pushing a can of drink into your hand on the street to the sometimes annoying online advertisements promising free samples with no commitment, free samples seem to be everywhere.
So the question is, what do companies stand to benefit from giving something away that has cost them money?
The answer to this is actually quite simple: for them to earn more money.
Creating Market for a New Product
One reason that companies give away free samples is to raise awareness for a new product that they have.
If a company’s product is new to the market such as a foreign food or a new drink flavor, they need to find a way to introduce it seamlessly to the public.
By giving away free samples, they are solving two problems. First, they overcome the barrier of having to actually force the people to pay for something that they haven’t tried yet; and second, the company gains new customers for their new product.
Although the company has to spend money for the free samples, they end up with customers who will possibly buy their products throughout their lives.
Building Brand Loyalty
You might be thinking that if free samples create market for a new product, then how come companies give away free samples of established products?
In this case, the company is building brand loyalty.
Maybe a new competitor has recently been challenging the dominance of a particular company’s product or perhaps they are already in a very competitive market. In this case a company may decide to give away their product for free to reward their existing customers and to potentially attract competitor’s market as well.
With the use of free samples, customers of a company suddenly feel grateful to them and tend to reward them by buying more of their products.
Companies understand that gratitude is a key component of loyalty. Not only do free samples increase the loyalty of their customers, they also attract new customers.
Improving a Quality of a Product
Another reason companies give away free samples is to test the popularity of their products.
By giving away the product for free in limited numbers and then asking for feedback, they are able to see what is and isn’t working for their customers. This gives them the opportunity to improve the product before they release it to a wider audience.
In turn, this improves the chances that they enjoy better sales.
Summary
In the end, freebies are a win-win for companies and consumers alike. Businesses gain valuable feedback around new products without taking the risks associated with launching a retail product. Consumers get to experience a product that they stand to benefit from for free.