Free A Little, Get A Lot

Tap into the power of gratis value-adds and service enhancements to strengthen loyalty and drive business to your organization.

 
 

Do you offer donuts, candy, mints, or other edible goodies to branch visitors? Do your drive-thru tellers keep a bowl of dog biscuits handy for pooches in the passenger seat? Do you sponsor free document shred days, offer tax preparation assistance, or provide patronage payouts when the credit union has a good year? If so, you are one of the many institutions that have uncovered the exponential power of free perks.

Giving anything away for free might seem like a counterintuitive proposal — How many times have we heard the business school maxim "free has no value?" — Yet as the following retailers and service providers demonstrate, turning free offerings, add-ons, and enhancements into increased customer engagement, new business, and expanded revenue streams is possible.

What's Old Is New Again

There has been a lot of talk recently about Bitcoin, the digital currency that operates outside of any government, bank, or otherwise central control. It's been heralded as the online currency of the future, a bizarre social experiment, and even a threat to law-abiding society as we know it. However, those of us in the know realize there is a more valuable piece of online currency already in wide usage: an active HBO Go password.

As a company, HBO has often been ahead of the curve. It was the first true premium cable channel, led the pack in original programming with The Sopranos and Sex in the City, and established an award-winning business model — since copied heavily by others such as FX, AMC, and Comedy Central. And in this post-Netflix world where people enjoy content from their personal electronic devices, HBO also chose to evolve with the times launching HBO Go in 2010.

Through a partnership with other cable providers, HBO subscribers can now access a website with more than 600 hours of streaming content through a variety of platforms. HBO Go apps are available on the Apple and Google platforms as well as through Amazon's Kindle. The PlayStation and Xbox gaming consoles and the Roku streaming video player also offer HBO Go as well.

Many cable providers offer on-demand access to premium programming through the television cable box, but options are typically limited to a few dozen movies and a handful of current episodes for each series. On HBO Go, subscribers can access a large catalog of movies and full runs — not just individual episodes and seasons — of hit series like The Wire and Curb Your Enthusiasm, original programming available almost nowhere else as streaming media.

For most folks, HBO Go is a free service that comes with an HBO subscription, and HBO does not grant access to the streaming service alone. According to CNET.com, some cable providers have worked out deals to offer more affordable HBO subscriptions to the burgeoning cord-cutter crowd, yet these services still require a basic cable relationship. HBO Go might one day become available as a standalone subscription offer, but for now, the premium cable network is leveraging this free — yet exclusive — service to its maximum benefit.

The Credit Union Lesson:

Whether your initial products and services are free or not, increasing users' accessibility to them (via free apps, free credit counseling sessions, etc.) can be a positive differentiator as well as a way to make traditional offerings seem more exciting and fresh.

Same Price, Expanded Value

Question: Which of the following statements about Amazon founder Jeff Bezos is true?

  • He has funded an effort to recover the NASA rockets — currently located on the floor of the Atlantic Ocean — that launched the historic Apollo 11 shuttle.
  • He bought the Washington Post with his own money.
  • He and Tesla Motors CEO Elon Musk have a running competition to see who will be the first to transform the future of space travel through their respective companies, Blue Origin and SpaceX.
  • He wants to use drones to deliver your Amazon packages.

Answer: All of them.

Yet perhaps Bezos' most impressive accomplishment to date is demonstrating how to bundle and sell the concept of "free." Amazon.com is currently the standard-bearer for the online marketplace. Other websites might have come first, but no one can deny the amazing feats this brand — which began as an online bookstore in 1995 — has accomplished. Today, the world's largest online retailer sells books, clothes, furniture, DVDs, spoons, French horns, combination treadmills/standing desks, and even fresh groceries for some market areas. Amazon offers almost anything for the price of the item plus shipping — that is, unless you're an Amazon Prime member.

Amazon rolled out this membership program in 2005. For an initial price of $79 a year, subscribers received free two-day shipping on qualifying items. Shoppers loved Prime and readily took advantage of the shipping savings. Bezos improved this service in February 2011 by adding free access to the entire Amazon Instant Video library, which makes movies and television shows available for rent or purchase. And in November 2011, Amazon doubled down again and gave Prime members free access to the Kindle Owners' Lending Library, which includes thousands of popular titles Kindle owners can read on their devices. Users can check out one book a month and are not beholden to a due date. Currently available titles include J.K. Rowling's Harry Potter series as well as Suzanne Collins' Hunger Games trilogy.

According to the Huffington Post, Amazon claims to have "tens of millions" of Prime members, so despite the fact that the company has since raised the price for this service to $99 a year, it's safe to say this pay-for-free phenomenon is not going away any time soon.

The Credit Union Lesson:

It might seem that Bezos and his team threw away additional revenue by not immediately charging more for Prime add-ons, but in actuality they were making a calculated investment in wallet penetration. Adding new, free benefits that go along with credit union membership can be a great differentiator and value to both parties, particularly if the service is subsidized by accompanying gains in efficiency or deepening member relationships. Once secured for the long run, credit unions can monetize that loyalty in way that benefits both parties.

Come For The Free, Stay For The Service

With apologies to the cronut and Oreo's new cookie dough flavored confection, the next big thing in food service isn't some convoluted food portmanteau — it's free Wi-Fi.

Mega coffee chain Starbucks partnered with AT&T back in 2010 to offer free Wi-Fi in all of its 7,000 nationwide locations. In July 2013, Starbucks changed Wi-Fi providers to Google and is currently undergoing an 18-month transition, reports Forbes. However, the perk remains a foundation of the company's business model.

Offering free Wi-Fi might seem to encourage non-customers to set up shop for hours, but the concept is gaining traction throughout the food services and retail industry. According to its website, McDonald's currently offers free Wi-Fi in 11,500 of its more than 14,000 nationwide locations, and companies such as Dunkin Donuts, Panera, and Taco Bell are also increasing participating locations.

As consumer choice and brand loyalty rises and falls, businesses must adapt to the demands of their marketplace. Customers still visit a location for the brand experience — it's just that now they expect that experience to include free Internet access.

The Credit Union Lesson:

A partnership with a complementary (and occasionally complimentary) service provider is another wallet penetration technique that credit unions have been using for years. Examples include partnering with local utility providers so members can pay bills for free when they visit the branch, letting local artists display their work at your headquarters, or even allowing members to purchase tickets for the local high school football or minor league baseball games directly from tellers. These kinds of opportunities help identify your credit union as a central, multifaceted community destination and a trusted resource whatever the need may be.


When Free Flops

The French have a common saying — succès de scandale. And here in America we say "There's no such thing as bad publicity."

But as the following examples demonstrate, this sentiment isn't always accurate. From retailers promising something they could not deliver to unforeseen expenses and critical missteps, few of the companies involved in these promotions came out better for wear.

In 2008, soft drink manufacturer Dr. Pepper Snapple Group brazenly promised everyone in America a free soda if mercurial rock band Guns N' Roses released its long-anticipated album Chinese Democracy later that year. Rising to the challenge, band leader Axl Rose released the album in November.

For it's part, Dr. Pepper did set up a webpage for a limited time that allowed people to register for a free drink coupon. But the website immediately crashed, many thirsty fans did not get their soda, and Rose attempted to sue the company as a result of the PR fallout, according to musicradar.com.

According to Gawker.com, KFC introduced its Kentucky Grilled Chicken in 2009 by partnering with media darling and empire-builder Oprah Winfrey. Winfrey told her viewers and fans to visit a website where they could download and print a coupon for a free two-piece meal.

Although the Internet infrastructure held up, the restaurants did not. KFC locations were totally unprepared for the volume of people redeeming coupons, which resulted in depleted inventory, turned-away customers, and even riots at some locations.

According to local ABC affiliate WCPO, in 2013, hometown pizza parlor LaRosa's offered a free small pizza to fans who attended a game during which the Cincinnati Reds struck out 11 or more batters on the opposing team.

Based on the Reds' 2012 performance, the pizza maker expected the offer to apply to approximately 13 games. However, by August 2013, and with 23 home games to go, it had already doled out more than $500,000 in free pizzas. Despite the unforeseen expense, LaRosa's CEO Mike LaRosa said the promotion was "a lot of fun" and pledged to see it through. No word yet on a 2014 free pizza promotion.

- Erik Payne contributed to the article.

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April 11, 2014


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