When running a small business it is all too easy to fall into the trap of thinking we have to start off giving things away for free in order to build our reputation.  Whilst this method of building brand awareness may have some benefits, it needs to be thought through and the results measured, in a very controlled way.

Why?  Because free holds no value in the mind of the recipient and by giving too much away you may be causing problems for your business. In the majority of cases I have seen, when someone gets something for free, they do not perceive and appreciate the full value that the product or service they are receiving is really worth.

I know of a couple of small businesses who have spent time creating vouchers for a massage or facial and promoted this through a competition and then the voucher hasn’t been used by the winner.  A waste of time, effort and money for all involved.

I know of a lady who spent time setting up a free workshop to teach dance classes where a good number of people booked and reserved the spaces and yet only one actually turned up.

In my own line of business, there are often opportunities for fully funded business support.  Whilst many people who take advantage of this truly do appreciate it, there are those who have the mindset that free holds no value and therefore it is unlikely to be worth much to them so they fail to attend the workshops or appointments they are booked on and deprive others who would have benefited from having a place.

This is demoralising for all concerned and puts in jeopardy any future opportunities that may have been in the pipeline.

But why is this?  Because no matter what the price of the thing that has been received, if it is given away for free, subconsciously that product or service is worthless to the recipient.  During some research on this subject, I came across many examples of this.

The psychological effect of free

One was a person who had received a book worth hundreds of pounds for free (they didn’t enlighten me on the actual book as it must have been quite special for this amount of money!).  On the same day, they made a purchase of a book on Amazon for £10.  And which did they read?  The one they had paid for.  Because this had been paid for with their hard earned cash they perceived its value as higher than the one they had received for free.  Crazy huh?  But true.

With free workshops and funded support, maybe people don’t turn up because they think there is a catch.  Otherwise, why would it be put on for free?  That word ‘free’ has such a negative effect on us psychologically.

So if you are a small business owner considering a free offer, think carefully if you can really afford to put this offer on.  What is it going to cost you to run the promotion and provide the free offer?  Can you afford to lose this money?

If you go ahead, measure the results very carefully.  I do not have exact figures to provide you with but from research have discovered that an incredibly small percentage of people who receive a free offer will ever go on to purchase at full price in the future.  These people tend to be bargain hunters and so just sit tight until another freebie comes along.  They are not your target audience so do you really want to waste time dealing with them?  Unfortunately, they have the attitude that free holds no value to them.

And if you are the recipient of a free offer, think twice before accepting.  If you don’t see the value and have no intention of using the freebie, let it go to someone who may be more appreciative