This concept if implemented correctly is a total game changer. This could single handedly be one of the most powerful concepts I used in my businesses. If you know much about my story I spent years struggling in my smoothie business and absolutely hated it. One of the turning points for me however was when my friend Josh at Freedom Marketing here in Phoenix Arizona taught me a few different principles. One of them was the lifetime value of a customer and the other was the power of an absolutely FREE offer. I’d like to talk to you right now about the power of absolutely free. Most of the advertising representatives and people selling marketing and advertising right now are not teaching you the truth. I hate this. They are generally trying to sell you as much advertising as possible, because that’s their job. Most advertising companies will recommend that you do a buy one get one free offer as the most aggressive, to the other extreme of perhaps 10% off or $1.00 off a product. I learned from my experience, however, that if you don’t already have a brand name established, and a huge regular customer following there is a very, very small chance of getting someone into your store to try your products with a weak offer such as $1.00 off, 10% off, or even a BOGO. If you really want to make massive improvements to your business and really accelerate your customer acquisitions, it is absolutely essential that you offer new customers an absolutely free something
Now it’s up to you to decide what you are willing to give away for free. I used to be afraid of giving away something for free because I only saw it as an expense. I was absolutely wrong! To really understand the power of free, it’s important to understand the worth of the customer. So if you haven’t watched the video or listened to the audio of the lifetime value of a customer, and gone through the exercise of the lifetime value of one of YOUR customers, I recommend you stop at this point and check it out. Go to www.coachtoddwoods/resources for the worksheet. That’ll make this seem a lot more clear and you will be ready to truly grow your business in the most powerful, effective, most simple way possible.
So let’s talk for a few minutes about how to overcome being afraid of giving away free product. Here’s a question for you to consider very strongly. Do you have enough confidence and believe in the quality of your product so much that you’re absolutely sure once people use your product or taste it they will fall in love with it so much it will bring them back again? If the answer to that question is no, I would highly suggest perfecting your product and your customer experience before you do any more marketing. Gone are the days that we can open up a business, open our doors and simply expect people to flock in, eat or drink our stuff and come back again unless it is an absolutely great experience and a phenomenal product.
Back when I was asked this question it was easy for me to say, “absolutely YES to both the product and the customer experience.” If you’re having a hard time creating
the experience or hiring the right employees you should really check out my articles on How To “Wow” Your Customers, and How To Hire And Keep Outstanding Employees. But if you are ready with a great product at a great customer experience the absolute best way is to offer free product to get new customers in.
In deciding what you are going to give away for free, try to focus on the experience from the customer’s point of view. When I first experimented with this idea of absolutely free my first thought was, “how little can I give away for free and get the customers back in?” Well in my business, the smoothie business, we had multiple sizes. Our main size smoothie was a 24 ounce smoothie. Our value proposition was that you could drink you 24 ounce smoothie and get the nutritional value of 3 to 5 servings of fruit
in each one. In other words it could substitute a meal. So in talking to my friend Josh, he said if you really want the customer to experience having a smoothie replace a meal, and that is the size you are really trying to promote, you must give that size away. Otherwise the customer will leave and not be full. It took a lot of
faith on my part to believe that this would work, but I bought into the idea and that’s what we did.
This was a turning point in our business, when we began to master the art of giving away our product absolutely free. Now obviously our goal is to only give away our product for free to acquire a new customer, or one that has not been in for a long time. Yes, I agree 100% that we are in business to make a profit. If done correctly, this will help you build a tremendous amount of loyalty from new customers, and strengthen your relationship with customers that don’t come in very often, and increase their visits per week or month.
So let’s take a look at a real example of this We will compare Traditional marketing vs. absolutely FREE. Here’s a question for you. Would you rather spend $1.30 to acquire a new customer, or $4.50? It’s a no brainer right? While most traditional advertising brags about a return of 1/2 to 1%, in other words if you send out a mailing to 10,000 people, you should expect about 50 to 100 people to bring in that coupon. That’s if you offer at least a buy one get one free. With most traditional mailing packs, you will pay about $400 to $450 to mail to 10,000 homes. Then deduct the discount you are offering the customers and that will help you figure out how much that advertising cost you. To keep this simple, let’s say that we are only going to calculate the cost based on what you paid for the mailing, $450. If at best you get 100 people to respond it costs you $4.50 to acquire each customer.
Let’s compare that with my method of giving away an absolutely free product, delivered through one of the marketing avenues or tools I will teach you to use in schools, If you use the achievement award program that I highly recommend, because as it is about the most effective most powerful marketing method on the planet here’s what this would look like in numbers. The only cost associated with this marketing method is the cost to print the achievement award, plus approximately 2 labor hours and the food cost of the free product you will give away. So if you were to be generous and give out a regular size ice cream, smoothie, slice of pizza, kids meal, cupcake, or baked good, what would your food cost be? For a 24 ounce smoothie for example the food cost including the cup, the lid, the straw, and the ingredients, would be approximately $1.20. To keep it simple let’s say that the achievement award cost .10 cents each to print and add that to the $1.20 food cost bringing us to a total of $1.30 to acquire the same 100 customers, that we did in the example above. I can guarantee you that the new customers that come in to get an absolutely free smoothie or baked good or ice cream will be much more excited to come back again. More effective, less cost Do you realize by giving out free product in this manner it will cost you and your business nearly 1/4 to 1/3 of what it would to use traditional advertising?
Here are some Real numbers and proof to back this up When we first truly tested this we used Josh’s company freedom marketing to distribute door hangers to 5000 homes around our store. The next week we did another 5000 followed by another 5000 the following week. We use this method of using door hangers before I learned how to get into schools and businesses and have other people advertise for me for practically free. Nevertheless, the first week after we did the initial door hangers the percentage of return was 13%. About 50% of those were new customers, and the majority of the other 50% hadn’t been in that not for a while. So to do the math, 13% of 5000 was about 650 customers. What would you do with an additional 650 customers in your business one week after such marketing? Tell me that is not awesome!
Through some research over the years we determined that our average customer would come in to our stores approximately 2 times per week since many would come in and use a smoothie for a meal. This is an average of 104 visits per year per customer. Our average smoothie price on a 24 ounce smoothie was $4 25. People very often would get an additional supplement boost, or a baked good item to go along with their smoothie. Our average ticket was about five dollars. 104 visits per year
multiplied by five dollars is $520 per year that customer would spend with us. Here’s the golden question! Would you give out an absolutely free product to acquire a new customer that would spend over $500 per year in your store? Hmmmmm not much to think about on that one right?! The answer is obvious.
Now Perhaps in your business your average customer only comes in let’s say two times per month. And your average ticket item is only $3.50. That is an average of 24 visits Per year multiplied by $3.50 for a total of $84 that customer spends with you per year, Even in this example, with lower numbers, it’s a no-brainer that you would give away $1.30 in Product if a customer was going to spend $84 bucks with you right? Now if you are a naysayer you may be saying that Todd, not every customer that gets a free product will come back again. Or Todd, there may be abuse with this
and we may be giving regular customers a free product. That’s absolutely true, but it is just part of business. Is it really such a bad thing that a regular customer runs across an absolutely product offering? Don’t you think that would make this customer love you and your company even more? Absolutely yes!
If you haven’t tried this before, I would highly recommend it. Remember the key to this working and converting those new customers into “lifers” is making sure your product and customer experience is outstanding!