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Have you got some free stuff lately and have been wondering: “Why do companies give away free products?”
Well today, we will be discussing exactly that, how they make money and most importantly how you could do the same if you wanted to. So, you will not only learn the methodology behind what these companies are doing but also how you can actually do the same.
The reason, I can tell you how it works is because I do it myself. In fact, you may have even received a pop-up on this article.
Why Do Companies Give Away Free Products?
So, why do companies give away free products? Companies give away free products so that they can collect your data. The most common data they collect is your email address, however, sometimes it’s also your phone number and other data. Using this data, they can then contact you in the future to sell something to you.
Not only do they get one chance of selling to you, they actually get multiple chances, as they can send an email every week or even every day if they wanted to. Multiple chances to sell means increased chances of sales.
If they were to just buy adverts and send the traffic (visitors) to a sales page, then on average 98% of visitors will leave. Not only will they leave, but they will also leave forever, as the company does not have their contact information. However, by giving away something for free, they will get a lot of leads information for a cheaper price and therefore increase the lifetime value of a visitor.
After they have their contact information, they can then follow-up with these leads for months or even years to come to make (repeated) sales. It’s similar to big companies such as Spotify or Netflix offering free trials. Yes, the trial is designed to make the initial subscription sale, however, if the trial doesn’t make the sale, Spotify and Netflix will still have your contact information and may tease you with promotional offers to eventually make the sale.
If a company is paying for advertising space to give away free products, then they are paying a price for a lead, who they know is worth more to them in the long-term. They usually calculate this through previous sales statistics, or they test it.
Free + Shipping Explained
So, I am sure you may have been tempted with some free products where you only have to pay to ship the product.
“FREE + Shipping”
This is something used by a lot of E-commerce stores and usually, the shipping fee is a little more than the standard shipping fees. Usually, these items are very cheap and the company is even in profit by doing this.
However, sometimes this isn’t the case and the company is also trying to generate leads or make money on upsells. This is often used by dropshipping store’s as explained in Free plus shipping method.
In case you don’t know what dropshipping is, it’s when you sell products from suppliers for a higher price when an order is made you go and purchase it from the supplier for a cheaper price.
Why Giving Away Free Products Is Effective
Companies giving away free products is effective because:
It generates targeted leads
free products build trust
everyone likes free products meaning they will enter their information – Cheaper leads
So, the first reason is that it generates targeted leads. For example, let’s say that a company is giving away 20 free weight loss tips or an E-book on weight loss. When visitors enter their contact information, they will know that they are interested in Weight loss. This means that they will find it easier to sell weight-loss products to them in the future.
The second reason is that free products build trust. You are more likely to buy from a company that you already know or have given you something for free that you have enjoyed. This is another benefit of giving away free products.
Lastly, everyone wants free products, so it will be a lot easier to get visitors’ contact information, as the visitor will want the free product. This means, that the company is generating leads for a cheaper price than by simply asking for contact information.
How You Can Do The Same & Make Money Too
Now, what if I would tell you, that you could do exactly the same as these companies?
You can, but it’s not going to be easy. However, you can do the same and simply sell other businesses products, for high commissions between 50-75%. This model is called affiliate marketing and it’s something that we talk about a lot on this blog.
All you do is sell other businesses products, that’s affiliate marketing. If these products are digital, you will earn a high commission, 50-75%.