Was anyone else lucky enough to snag the Dunkin' Donuts "Free Iced Coffee Day" insert from Sunday's paper? Consumers who bring this coveted coupon into an NYC-area Dunkin' Donuts today or tomorrow can get a free 16oz Iced Coffee with no strings attached (Participating locations only, while supplies last, etc...)
Is it a good idea to give full-sized products or services away if you're a small business owner? Here are a few guiding principles. And since I currently have free coffee on my mind (and in my bloodstream), we'll use Dunkin' Donuts as an example when appropriate.
1) Leverage a Product or Service That Can Grow Your Business
Remember - when you give away a free product or service, you're not just doing it to be nice; you're trying to build lasting, profitable, relationships with your consumers. Therefore, the best product to give away is one that consumers (and their friends) will come back and pay full price for after the promotion ends.
In this case, it makes perfect sense for Dunkin' Donuts to give away iced coffee as an opportunity to drive both retention (the end of March seems like a good time to convert hot coffee drinkers into iced coffee drinkers so they don't defect for the summer), and acquisition (Dunkin' Donuts happens to have the most loyal coffee drinkers in the industry, meaning any new customers they bring in through this promotion are likely to stick around).
Small business owners - if you think you have a product or service that can be given away to build your brand and grow your business, then read on:
2) Make Sure You Can Afford To Give The Product Or Service Away
On the surface, this one seems obvious: The more expensive the product is to produce, the riskier the promotion becomes. Dunkin' Donuts got lucky on this one, as their flagship product (coffee) is presumably a low cost item, and their stores have the ability to produce lots of it.
However, if you're going to give something away, there's more to consider than just the direct costs. Other factors to consider include labor, materials, production capacity, and the size of your shop. There are plenty of horror stories on the internet that document what can happen if a small business promotion goes awry. (Example: Don't do this).
Small business owners considering a product giveaway or a high-value promotion should map out an extreme case scenario (e.g., "what happens if every coupon I distribute gets redeemed at once"?). If your business can't support this scenario, then the program should be reconsidered, or the coupon circulation should be reduced.
3) Be As Targeted As Possible
If you're going to give your products away, it's imperative that you get your promotion into the hands of the right consumers. The goal here is to share the promotion with enthusiasts who will embrace your offering, and to avoid exposure to the bargain hunters who have no interest in a long-term relationship. (It's kind-of like dating, when you think about it).
If you're a small business, make sure you have a solid list of contacts or prospects to share your free product with. Try to avoid a broad-scale promotion that covers a large area (like the Dunkin Donuts FSI). Not only do broad-scale promotions have a reduced targeting potential, but they're also expensive to produce, and even more expensive to fulfill.
4) Create A Story Around The Promotion
A product or service giveaway is great opportunity to share news about your business. Many companies leverage their promotions in press releases, crossover relationships, and brand-building platforms that extend well beyond the point of sale.
Take a look at this non-Dunkin' Donuts example: http://www.ihoppancakeday.com/
In this case, iHOP has turned a free signature item (a short-stack of pancakes) into a self-declared national holiday, complete with its own website, celebrity affiliation, charitable component, and social media platform.
Let the iHOP example serve as an inspiration. If you're planning on giving a product or service away, don't be afraid to get creative and build a targeted advertising platform or a social media-based theme around the event.
5) Make Sure Your Brand Is Well-Represented
The worst thing you can do by giving away your product or service is to diminish its percieved value. Before you begin your promotion, take a close look at the soon-to-be featured product, and make sure that you're representing your brand in the truest possible way.
Example: Dunkin' Donuts can give away free coffee without diminishing its brand, because its brand is built around familiarity and convenience. On the other hand, a local coffee shop that has a more upscale coffee selection and more of an interactive presence within the community may not want to build a platform around "free coffee".
Go with your instincts - if attaching the word, "free", to one of your products makes you feel like it could cheapen your brand and harm your long term image, then try to revisit the promotion in a way that makes the consumer understand and appreciate the true value of the promotion they're receiving.