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May 12, 2005

Comments

Chuck McKay

I also love giving away samples of intellectual property. Just never forget the two things that make a consultant rich: first, never tell everything you know....

Rakesh Ojha

This is realy a very nice and informative article. I really learned a lot from it.

I'm into Online Marketing and this article had given me a clear insight into various marketing strategies.

Great!

José Antonio Hernández


Long term strategy give away, I do not think you can just give away something taken for granted. I take electricity for granted, it is a commodity but I still pay the bill every two months.
In my opinion, you can only consider giving something away as a part of a long term strategy if:

1. The marginal cost of the product is low (in the case of skype, close to zero).

2.A You will boost the sales of complementors (skypein, skypeout) and the overall gross margin (including the total cost of the freebies) is positive in the long term. Or

2.B There are no complementos but by giving away something. You will be able to lock-in your customers and induce them to pay for the service later on. At least enough customers that will cover all current and future expenses and still get a return.
This is particulaly important when we consider the case of network externatilities where the higher the customer base the more clients are willing to pay for your products or services.
In the case of Skype. The company is currently making money from selling local calls and offering a free service between Skype users. They are happy and we are happy (while building our skype contact list). What will it happen once we each have a 100 user Skype list and the company starts charging us a flat fee for using their services? Chances are that most of us will end up paying for it.

Industry Shake Up give away. Do not see much difference with the Long Term Strategy one. Skype is, for example, allowing you to talk to other users without paying a line rental. Should not they fit into this category as well?.

Regards,

José Antonio

Dee Rambeau

S.W.A.G.
"so what...another giveaway..."
There's definitely a fine line between giveaways of value and free "junk."
AOL is a perfect example...who cares about another disc full of 1,000 hours...

John

I've had the most success with giveaways that are high value and low cost. Some examples:

*Books -- retail "value" of $10-$12; cost (in quantity) $0.75

*Stuffed bears -- Retail value: $12; cost: $2.50

*CDs -- Retail value: $15; cost: $0.99

Almost just as good -- a high perceived value item that's self liquidated. The books noted above were sold for $0.99 and the CDs sold for $1.99 -- making up all the costs of the "giveaway". We moved 100k books and 125,000 CDs. Not bad.

Bruce DeBoer

Good post.

I recommend seeding givaways often (I call sampling "seeding" for no good reason other than I like the way it sounds) because it offers useful feedback for a new product launch.

The other givaway I like is what I like to call an installed base givaway. It can also be viewed as part of a profit pyramid. This fits into your "long term" strategy. The company gives away product that they can either upgrade to a more useful version or the givaway can provide the company with an installed base that will be to their advantage in the future. It's a win/win to coin an overused buzz word.
Examples include:
-MS Outlook Express. The upgrade MS Outlook is much more useful.
-Apple gives away the iTunes program to gain an installed base.

Cool stuff - Thanks JR

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