Giving away products for free is far from sustainable, but then again there's a time and a place for everything.

Customers love getting things for free. Who doesn’t? The word free carries incredible power for any retailer, but it comes with an obvious cost.

A wise man once said “with great power comes great responsibility” and it’s safe to say this includes the power of offering free products or services. 

Offering free items and services has to be done in a tasteful manner. You can’t just sell anything for free, and the customer has to deserve it. Eroding margins is never a good idea, and empirical evidence has shown that constant discounts do not fare well for retailers.

So when is it appropriate to give something away for free and potentially take a loss?

The proper times are not as few and far between as you’d think. Using the power of free can increase average order value, build loyalty and move inventory.

Use free to incentivise an upsell/subscription 

When checking out, 81% of customers want free shipping options. Covering the cost of free shipping just isn’t possible every time you sell an item, so how can you make the customer happy without depleting your margins?

Increasing the average order value can cover your shipping costs. By providing a threshold to qualify for free shipping, you can give a customer an incentive to spend more.

Roughly 58% of customers will add items to their cart to qualify for free shipping, so try to upsell them and mention the free shipping perk that comes with it.

About 51% of shoppers also like having a personal login to save purchasing preferences. Offering free shipping to those who create an account with your business can not only influence their decision, but unlock a world of data to help further personalise their shopping experience.

Use free to build loyalty

Building loyalty is one of the most valuable tactics an online retailer can use to boost sales.

By influencing customers to come back and earn free shipping or a free item, retailers can keep shoppers from visiting a competitor’s website. Plus, 54% of customers would consider increasing the amount of business they do with a company for loyalty rewards.

Make the order threshold used to qualify for free items or shipping lower for those who have registered accounts with your store. You may take more costs upon yourself, but the value of a loyal customer is greater than the cost, especially since new customers are five to 10 times more expensive for retailers to acquire. 

Use free to move inventory 

Let’s say you ordered too many gloves for the winter season. Of course you could discount them heavily, but you could also implement a buy one get one free strategy to move the inventory. Inventory costs make up 45-90% of business expenses, so get the slow moving items out the door! 

Try including small accessories as a free surprise in mail orders. The touch can make the customer feel more special for shopping on your site, and you can find a way to get rid of these small items in your warehouse.

Free usually comes at a hefty price for online retailers, but it can draw some serious attention to your store. Like all great things, free items must be sold and advertised in moderation. Mix up your free offerings to keep them from getting stale, and be sure to keep your prices competitive and profitable.

When do you think the power of free should be used?

Ari Shpanya

Published 27 April, 2015 by Ari Shpanya

Ari is the co-founder of HomeShare and Zent , Graduate of the GSB Stanford Ignite program, and a contributor to Econsultancy.

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Comments (2)

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Peter Kelly, Senior Content Strategist at Critical Mass

Giving away valuable content for free can be a pretty useful lead-generation technique as well. While this plays a part in developing Brand Loyalty, there are legitimate marketing models some organizations use on this tactic almost exclusively (backed up by a strong usage of CRM, of course) - i.e. GatherContent

almost 3 years ago

Daniel Lee

Daniel Lee, Web Analytics Manager at Evans Cycles

A lot of companies/startups seem to offer free products (but predominantly services) to help scale their business.

'Free' benefits businesses looking to scale up quickly. These companies put scaling up before revenue, which is possibly a wise choice in the internet era.

Ultimately it seems that free is good for the user, helps the company grow and attracts investors.

almost 3 years ago

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