Small business owners often try to gain traction in sales by offering free products and services. Especially during hard times, you might be grappling with hard decisions when it comes to pricing strategies. While it might seem enticing to offer free products and services as a means of gaining traction, it may be more detrimental to your business in the long run.
During a time of economic downturns there is more pressure to offer free or even steep discounted pricing. Despite tough times economically, or even times that sales are declining, small businesses should resist the free offer and focus on sustainable and profitable business models instead.
The Hidden Dangers of Free Products and Services! Listen to the episode here.
Free Products and Services Have Little to No Value
Creating your products and services is an investment of your time, talents and expertise. When a customer does not pay for a product or service they will naturally perceive it as having little no value. Giving away free products and services ultimately devalues the quality of the product or service, the efforts associated and the overhead costs of production. Although you may not be trying to undermine the value of your products and services, giving them away for free may unintentionally send a message to your buyers that the quality of what you sell has little to no value.
Small business owners should recognize the value they bring to the table and price their products accordingly to communicate that value to their customers. The best way to communicate the value of your products and services is through a consistent marketing plan. Your marketing plan will educate and inform your customers and potential buyers about your industry, products and services, ultimately increasing buyer awareness and driving value worth paying for.
Free Product and Service Offers Pose Sustainability Challenges
Running a small business comes with its fair share of challenges. The toughest challenge most business owners face is financial sustainability. While it may seem like a short-term marketing strategy to offer free or steeply discounted prices, it will end up creating a long-term financial burden.
Selling your products and services generates revenue. Without a cash flow in the business, you will struggle to cover overhead and operational costs or invest in growth opportunities. Charging a fair price for your products and services not only ensures your business remains financially viable but also leaves room for continued innovation and improvement.
Creating Customer Expectations and Perceived Value
Offering your products and services for free creates unrealistic expectations among customers. Once they perceive the value as free or very low cost, it becomes much more challenging to transition to a paid model later on. When customers become accustomed to receiving something for free, they may be reluctant to pay for it in the future, even if the quality or value has increased.
The perceived value of your product or service offers will suffer when it’s given away for free. Charging a reasonable price establishes a baseline value for the offerings and sets expectations for your business and your buyers. In the end, fostering a healthier and more sustainable relationship with your buyers will prove to be a more sustainable plan to grow your small business.
Charging For Your Products and Services Is a Requirement for Growth
Balancing the value of your time and expertise, facing sustainability and growth challenges during uncertain times, as well as managing customer expectations presents complexity in the decision making process. All of these things require critical considerations as you grow a successful and sustainable business.
Attracting a large customer base through free offerings may seem appealing for getting your products or services into more hands. However, as a small business owner you should carefully weigh the long-term consequences of expected discounts or freebie seeking customers.
Instead of giving your products and services away, focus on creating value worth paying for! By creating value, small business owners can pave the way for a prosperous future and avoid the pitfalls of the “freebie seeking markets.”
