WHAT REALLY IS THE PRICE OF FREE?

We’ve all seen it: the advertiser who’s afraid to give anything away for free. Somehow, it’s beneath him. Or it’s too costly. Or it will taint his image.

And yes, maybe there are times where this is true. But more frequently, the advertiser is missing out on one of the single best ways to advertise his business cost effectively.

GRAND SLAM GIVEAWAY

Denny’s has just done a huge national promotion. You probably know about it. The Grand Slam Breakfast giveaway last Tuesday. An estimated 2 million people turned out for a free breakfast that normally would’ve cost them six bucks.

Many of these people waited hours.

So, let’s do the math. 2500 restaurants. 2 million people. 6 bucks per breakfast. That’s a 12-million dollar retail value just given away. Divided by 2500 outlets, that’s $4800 per store. That’s not cost, mind you, just retail value. It’s hard to know the margin on a grand slam breakfast—and when the chain is planning to give away millions of the things, you know they were buying in bulk.

So, for sake of argument, let’s say that any margin they would’ve made is eaten up operating costs. Say it cost each restaurant $5,000. (Granted, this does not count advertising costs. But then again, most people taking advantage of the promotion will buy beverages, which have a huge margin. So we’re going to keep this simple.)

Does $5,000 seem like a reasonable price to pay to get 800 customers into your business on one day? And let’s say only 10% of them have never been to Denny’s before. But now that they’ve had a free breakfast, they’re believers. How long will it take 80 new customers to put $5,000 back into the business? At 62 bucks a head—especially if many of them have families—it won’t take long.

More importantly, the amount of goodwill generated by the giveaway is far beyond the cost of trying to generate the same amount of goodwill through advertising.

For the price of a free breakfast, Denny’s has potentially created or re-energized 2 million Denny’s evangelists. The people who went will be talking about their monstrous breakfast 9which is already affordable at 6 bucks), their experience standing in line, and maybe even about being on the evening news. And guaranteed, Denny’s ended up on the evening news everywhere.

How many people sat there, watching the news, realizing they missed a good thing and now have a Grand Slam Breakfast on their mind?

There is a vast and un-measurable value in what Denny’s has done. It extends well beyond the cost of promoting a free breakfast. No advertising is more powerful than the word of mouth generated by this promotion.

ONE OF THE LEAST EXPENSIVE, HIGHEST VALUE PROMOTIONS AROUND

We’ve recently been talking with someone about marketing a new business venture. It’s a chain of fast casual dining restaurants. And since Chipotle is considered an example of the competition, we’ve been looking at Chipotle’s marketing.

Apparently, when Chipotle went into New York, they kicked off with a promotion to give away 6,000 burritos.

Now, you could saturate the airwaves with radio and TV advertising, talking g about your new store opening. It would cost tens of thousands.

Or, you could buy much smaller advertising schedules, send out some press releases, and give away 6,000 burritos.

People are attracted to free stuff like iron filings to an electromagnet.

And those 6,000 people who got free burritos were suddenly evangelists for the Chipotle brand.

How many of those 6,000 people are now dragging three of their friends into Chipotle?

Let’s say half of them return and bring three friends, that’s 9,000 more new customers.

And each of those 9,000 then evangelizes the brand his or her friends.

Geometric progression is a beautiful thing. It’s what has made millions and millions of dollars for thousands of network marketers. It’s what made untold millions for Albert Madoff before he finally got caught. It’s like a Ponzi scheme only better—because it’s legal and it actually works and you don’t have to invite your friends over to your house for a meeting that you won’t explain until they’re in your living room.

OK, CHIPOTLE AND DENNY’S ARE GREAT—BUT WHAT ABOUT MY BUSINESS?

This model is entirely adaptable to economies of scale.

When I was VP of Marketing for a small, homemade ice cream company in South Miami Beach, we gave away a ton of ice cream. It went a long way towards building our customer base.

Roy Williams took the free ice cream model a step further. He apparently had a guy call him up saying he wanted to do radio, and had $8,000. Since it was way too small a budget, Roy gave him some free advice, which went something like this: buy one day’s worth of spots on the biggest station in town. Buy three spots an hour from 8 to 6. Tell people you’re giving away free ice cream, no strings attached.

It cost that ice cream store considerably less than $8,000 and netted them hundreds of new customers—all in one day. And each of those new customers will go back to where they had the free ice cream because they enjoyed the experience, and they’ll bring their friends and family.

And lest we forget, people who get free food often want drink—which is not free and is very profitable.

In tough times when people are complaining about slow business, it’s time to think aggressively. And giving away free stuff is just one viable strategy as long as the promotion can create brand evangelists.

Never underestimate the value of creating an evangelist. Probably half the testimonial commercials we’ve created are stories told by people who were referred to the business by a friend.

Free stuff leads to people who want to trumpet your brand.

As always,

Blaine Parker

Your Short, Fat Creative Director in

Park City