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Case In Point: Giving Away the Store Can Make You Rich

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We’ve been hearing it for years. “Free is a big pull for customers.” Most people think of the “but wait if you order now” bonuses associated with infomercials. However, Caryn Smith of http://www.LapelPinsRUs.com has found the secret to giving away as much as possible and still turning huge profits.

KARON: Hi Caryn. Good thing we spell our names differently or this would be quite a mess : ) Thanks for your time today.

CARYN: It would be a mess! How funny that we both have the same name and spell them so differently. I’m glad to be here, Karon.

KARON: I was amazed when I looked over your site. All the information said, “Free this” and “Free that” These are things that every other company charges for. What made you realize that giving away many of the normally fee-based services would actually increase sales?

CARYN: We didn’t always offer free FedEx shipping, artwork w/unlimited revisions and no mold or setup charges. However, after many years of listening to our customer’s and examining the marketplace. We decided to give it a try… and I am happy to report that it has worked.

KARON: So, how long have you been doing this?

CARYN: This year (2003) is the 23rd year Lapel Pins R Us has been in business. And we have been offering our products and services on the Internet since 1999. We’ve been doing the freebie thing for years (although I don’t remember exactly when we started it).

KARON: Well, I’ll assume that you’re turning a profit or you would have stopped. But doesn’t it decrease your profits to offer so much for free?

CARYN: Yes, it does. The amount of profit we make per sale has gone down since we started offering the services for free. But we have been able to make up for this with increased sales (volume). Since there are so many fixed costs with manufacturing lapel pins, we’re able to contain the losses and still make a significant profit. So, it is a win/win for both us and our customers.

KARON: OK, I’m all in favor of giving something free, but I’m also a little skeptical. I mean, the mold fee is usually about $50, the overnight shipping runs anywhere from $14 to $50 depending, and the design fees can reach a couple of hundred dollars. Do you have any “proof” that all your freebies are working?

CARYN: (Laugh) Well the proof is in our sales numbers. Our annual sales have been going up by 20% to 30% a year since we started offering the free services and only charging for the actual products we sold.

KARON: WOW! Yep, I’d call that proof! Congratulations, Caryn. Those are fabulous numbers! So, if someone else wants to give this a try, what would you advise him/her to be careful of so they don’t give away too much?

CARYN: We were very concerned about this in the beginning. But, like anything else… we started out small by only offering free artwork. When we saw that this was working and sales were going up we added free overnight shipping. Finally, we started giving away the mold charges as well. The decrease in the amount of profit per sale was made up for by an increase in overall sales.

KARON: Good advice start slow and monitor the response. What words of wisdom do you have for people who may be hesitant to offer freebies or guarantees?

CARYN: In today’s very competitive marketplace you must do something to differentiate yourself from your competitors. And I can’t think of a better way to do this (in our case) than to give away the services everyone else is charging for.

KARON: You’ve reminded us of several important marketing lessons, Caryn. Listen to your customers, give them what they want, and differentiate yourself from the competition. Thank you very much!

CARYN: My pleasure!

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Case In Point: Giving Away the Store Can Make You Rich
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