Starting Up: Freebies Can Spur Sales

From smSmallBiz

WHEN SHANNON LOWE , founder of parenting blog Rocks In My Dryer , started reviewing products on her site two years ago, she quickly became inundated with free stuff. Lowe's inventory grew so large that she created another blog, Bloggy Giveaways , this past August just to get rid of it all. And that's when this stay-at-home mom in Tulsa, Okla., realized that giveaways are a hit.

Shortly after offering the first free product — a custom T-shirt from Planet Mom T Shirts — Lowe saw traffic grow to about 4,500 visitors a day. "Readers love free stuff," she says. And business owners clearly love the exposure: Bloggy Giveaways now gets enough giveaways to offer a new free item every Monday through Friday. Instead of a company buying an ad on her blog, which might stay up for about two weeks, "they get [something like] $1,000 worth of clicks for one product," she says.

Jenny Jones, a former magazine editor in upstate New York who pens the parenting blog Buby's Place, says giveaways work even when you don't offer your own products. Jones, who regularly enters items such as a designer baby-wipes case or a baby bag into giveaways such as those held at Bloggy Giveaways and Design Mom , says: "I'm using the giveaways to drive traffic." She hopes readers will turn into shoppers at her new online store, which should be live by the end of the year. So far, Buby's Place, which launched in March, has received nearly 18,000 visitors. According to Jones, her site averages about 1,000 readers per week. However, during giveaway weeks, the site's traffic doubles. "The giveaways are definitely working for us," she says.

No matter if you give away your stuff or someone else's, offering consumers free products can help put a start-up business on the map. But since giveaways can further drain already cash-strapped small businesses, be sure to reserve your efforts for the right time and place. Here are a few giveaway strategies that might make sense, depending on your goals, target market and type of business.

Trade Shows

Trade shows provide one of the best opportunities to spread the word among people in your respective industry, says Robert D. Hisrich, a global entrepreneurship professor and director of the Entrepreneurship Center at the Thunderbird School of Global Management in Glendale, Ariz. While consumers themselves don't often attend these events, buyers for big retailers or distributors often do. Concentrate on getting their attention and leaving them with something to think about. For example, "you will definitely want to have some significant product literature as well as samples," says Hisrich.

These events can also be a good place to connect with tastemakers such as members of the press, suggests Paul W. Farris, a business administration professor at the University of Virginia's Darden School of Business and author of "Marketing Metrics." Plying influencers with your products can help spread the word to a wider audience, he says.

Since 1997, Francine Glick, founder of Water Journey, the Livingston, N.J.-based maker of hand sanitizer Hands2Go, has been pitching her products at trade shows. Having a presence at these events, she says, was key in getting placed in certain retail stores. That's because at these events, she says, "buyers come to you."

Trade shows, however, aren't cheap. After factoring in airfare, employee pay, booth design and registration fees — not to mention the lost opportunity of not selling the products you give away — just one event can cost around $10,000, Glick estimates. She also spends a lot of time preparing for and following up after each show. Otherwise, "you're spending a lot of money and not getting much to show for it," she says.

Straight to Consumers

If your products aren't already on store shelves, providing free samples to consumers may trigger demand — and that, ultimately, can encourage retailers to stock up. And even when your products are widely available, offering a free sample to would-be customers may increase awareness and acceptance.

Of course, not every consumer will care about your product, even if it's free. Since the last thing you want to do is waste time and money giving free products to consumers who simply aren't interested, "find out when your customer will be receptive," says Dominique M. Hanssens, a marketing professor at the University of California at Los Angeles's Anderson School of Management. "When that customer is present you should be present."

Farris suggests pairing with complimentary products. For example, a cheese store owner might consider partnering with a local wine shop and offer customers a free sample of cheese with each wine purchase over a certain dollar amount. "Samples are most powerful when you really need to use the product to appreciate it," he says. Farris also recommends in-store demonstrations. If you have a product that looks different from what people are used to or that may require some instruction, providing an explanation or a sample lesson, "may trigger more understanding of what the product is" and, in turn, spark future sales, he says.

Cheap Advertising

Businesses that eke out of most or all of their profits from advertisements might want to consider giving away their products even more regularly, says Hisrich. In business-to-business sales especially, "there is no reason for a company to use a different product unless they are dissatisfied" with what they're using currently, he says. "Companies have very little incentive to do business with you unless you can propose a better value proposition" — that is, cheaper or free, he adds.

For example, when the Austin, Texas-based technology firm Spiceworks launched its information-technology management software in July of last year, the company decided to give it away. In lieu of charging customers, Spiceworks draws its revenues from ads that run along the side of a user's computer screen. Since the launch, the company has been able to sign up 160,000 IT professionals. "When something is free, there's no barrier to try," says Spiceworks co-ounder Jay Hallberg, who added: "Once something costs a penny I think immediately people hesitate."

("Starting Up," a weekly column written by Diana Ransom for smSmallBiz.com, follows entrepreneurs through the early stages of launching a business. Write to her at dransom@smartmoney.com .)

Corrected on Nov. 20, 2007:

Technology firm Spiceworks is located in Austin, Texas, and not in San Francisco as an earlier version of this story stated.

---

SmartMoney.com provides news, information, and tools for business professionals and growing businesses. All content provided by SmartMoney is © 2008 SmartMoney®, a Dow Jones & Company, Inc. and Hearst SM Partnership.