Marketing
Why Freebies Sometimes Backfire
Consumers love getting something for nothing. The marketing strategy works great to grow revenue when done right but sometimes backfires.
Jun 24, 2019

Why Freebies Sometimes Backfire

Giveaways Should Complement, Not Replace Paid Versions

Jun 24, 2019
Marketing
As Featured In 
Journal of Marketing Research

P.K. KannanConsumers love free samples, discounts and trial versions. When done right, the marketing strategy hooks customers and steers them toward paid options. But new research from the University of Maryland’s Robert H. Smith School of Business shows why giving stuff away sometimes backfires.

“Not all samples are created equal,” Maryland Smith professor P.K. Kannan says. “You have to pay attention to the design.”

Working with Maryland Smith PhD alumna Alice Li, now at the Ohio State University, and Sanjay Jain at the University of Texas at Dallas, Kannan explores why some giveaways work better than others. The key is whether or not the samples function as a complement or substitute for the full-price version.

“If the attributes of the two formats are sufficiently different — which makes the consumption experience different — then the two formats become more like complements," Kannan says. "They don’t become substitutes.”

Owning music on your smartphone, for example, is not the same as going to a concert. The two experiences complement each other. Doing one thing raises awareness and increases your desire for the other.

Something similar happens when baseball fans watch free games on television. Attendance at local ballparks goes up, not down. But reading an online article about the game on a free news site is similar to reading it in print. One activity substitutes for the other, which kills newspaper subscriptions.

The study, featured in the Journal of Marketing Research, looks specifically at what happens when a publisher offers free PDF versions of books for sale.

The research shows that PDFs often make a sufficient substitute for text-heavy books with low production quality (boring cover, black-and-white images, dull paper). But PDFs tend to boost sales of more elaborate, colorful, highly produced books.

Kannan says the complementary effect is strongest when the free or discounted sample reflects the quality of the original. After all, it's hard to grow an elite brand by distributing inferior samples.

“One of our main findings in the context of sampling suggests the provision of a free high-quality sample for high-quality digital content increases sales of the high-quality content,” the authors write.

The result can be extended to other digital sampling situations, such as online movie trailers and digital music samples. “Provide high-quality samples where the actual product is high quality,” they write.

Read More: Li, Alice & Jain, Sanjay & Kannan, P. K.. (2018). Optimal Design of Free Samples for Digital Products and Services, is featured in the Journal of Marketing Research.

About the Author(s)

KannanPK

P. K. Kannan is the Dean's Chair in Marketing Science at the Robert H. Smith School of Business at the University of Maryland. His main research focus is on marketing modeling, applying statistical and econometric methods to marketing data. His current research stream focuses on attribution modeling, media mix modeling, new product/service development and customer relationship management (CRM).

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