I’ve been attending many of those well-intentioned networking mixers that lure mildly introverted folks from the comfort of their home offices in search of cheap drinks and piles of business cards. The themes varied, but the results were the same: I met dozens of nice people nervously pushing their new ideas and, in some cases, weird product samples. I left with a pocket-full of business cards and offers to test, try, sample, demo, and tour so many, many things that I never intend to use.
I loved it!
I love new business people. They are full of energy and ambition and earnestness. Most of them are truly excited about their new ventures, have dedicated all of their disposable income, much of their free time and most of their social lives to creating whatever it is they’re trying to sell me on at these events.
I listen to every pitch. I ask questions and take a look at the product. Say something nice (or at least neutral). And, it never fails. They offer some portion of their product or service to me gratis. That’s right, FREE. I love free as much as the next guy, but when it comes to small and startup businesses, I wonder if the excited new owners don’t go too far. How much is too much when you’re talking about giving it away?
I conducted an unscientific poll of my new friends. I asked each of them 3 questions about their sales strategies:
- “Are you giving any of your products/services away free?”
- “Are you offering any discounts to new customers? If so, how much of a discount?”
- “What’s working?”
Twenty-three lucky souls participated in my impromptu poll. Here are the results:
- 18 are currently/have at some point offered product/services free of charge
- 17 are currently/have at some point offered discounts on products/services
- 7 offered discounts of at least 15%
- 4 offered discounts of 20%-25%
- 4 offered discounts of 30%-35%
- 2 offered discounts of 50% or greater
The final question brought the most interesting answers. The most oft-stated response…”I’m not sure.” Scarily, my new friends were giving things away and offering deep discounts with no real measurable, or even anecdotal, results. They all went on to explain their respective rationales for using the give-till-it-hurts sales strategy. Basically, it all boiled down to getting their product into the market, and hopefully, garnering good reviews and more importantly, referrals for paid work.
Sounds reasonable to me. But, I wondered aloud with my new friends, “Do you think that you might be able to land the work if you offered a slightly lower discount, or if you offered one free something or other contingent upon the purchase of another?”
Most hadn’t actually applied any social science, consumer behavior theory or marketing guru-isms to determining the right discount level and whether or not the product/service they offer has actually been effectively marketed this way. They just assumed no one could pass up a good, quality product when it’s free or darn near.
The others, those who were willing to share a little more with me, relayed stories of AOL and other companies that had given them free services and for which they ultimately became paying customers. I rattled off a few of the freebies I’d received in the past too. Unfortunately, I didn’t recall being willing to pay for any of it ultimately. I’m not sure if that’s because I only got crappy product for free, or if I’m just a cheap bastard who takes every free sample so I can avoid paying for the things I think I might need. Who knows?
What I do know is that the vast majority of the new business owners I’ve met at these networking events have experienced the discounted/free product-driven bonanza that larger businesses have experienced. This tells me that, though larger businesses have built empires and market share by giving away new products and services free or deeply discounted, everything that’s good for the goose is not good for the duckling.
Here’s why?
Usually small business owners don’t have as many resources at their disposal as their larger counterparts. Most don’t have a team of employees who can concentrate simultaneously on creating product, growing sales, marketing campaigns and business operations. Most couldn’t afford to pay the team if they did. The rest are parties of one; they are the business. So, moments spent giving it all away are moments not spent developing products/services. Moments spent developing products/services are moments not spent getting the word out. And both of these activities are potentially time spent NOT getting paid.
Why not increase the opportunities to get paid by spending more time merely convincing folks that they not only want to try your product/service, but they need to try it. And, that they need it so much that they might be willing to pay for it.
Then, convince them that the price is right–the right price for a unique product/service of this quality level created by a person of his/her caliber.
As a small business person myself, I understand the desire to get your name or that of your product out into the market. I understand wanting it right now. But, I don’t understand giving away good stuff that you could be selling, or discounting it more than you should without finding out how much you might have been able to get.
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