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2015-12-23 00:00:00Cash FlowEnglish Free Trials Work?

Do Free Trials Work?

2 min read

There’s an expression in business: you need to spend money, in order to make money. The idea behind this statement—that you have to invest in order to gain financially—is also behind the concept of ‘free trials’ and ‘free offers’. Giving something away for free means that you’ve incurred a cost that you can’t recover, in the hopes that this gesture will pay big dividends in future.

Why a free trial? Why you may ask, do companies offer free trials? Quite simply, it’s to attract more customers and widen its customer base. Have you ever noticed how some brands will include an additional ‘freebie’ with the product that you’ve paid for? Like a free tube of toothpaste with that toothbrush you just bought. That company is doing one of two things: getting rid of slow moving stock or product testing their latest toothpaste (giving it away for free to evaluate it popularity with customers).

Most recently, Microsoft has offered customers a free version of Windows 10 in the hopes that customers will beta test the software and provide feedback. They are also hoping that if people take to the product, its popularity will spread through word of mouth. Experts agree that free trials can benefit a business, but only if they’re well planned and executed, and if the product being offered is suited to such experiments.

Things to keep in mind Before you offer customers free trials, there are a couple of things you need to keep in mind.

  • Do you have a broader ‘customer acquisition’ strategy? I.e. is the free offer a ‘one off’ deal or will you follow it up with other activities and offers. One study showed that only 20% of free trial offers resulted in customers actually buying the product. It was only companies that got in touch with individual subscribers and offered to help them use the product that experienced conversion.
  • Another popular expression is “why buy the cow when you can get the milk for free?” What it implies is that people are unlikely to buy a product if they can get trial versions of it for free. That doesn’t have to be the case, since it’s entirely possible for customers to fall in love with your product during the trial period. However, this is one potential outcome that you have to keep in mind and plan for.
  • Cost is of course a huge factor, and is something that you should be able to recover in the long run. Experts recommend investing at least 10% of your monthly sales in such ventures if you wish to see any results.
  • One size does not fit all. Free trials work for certain types of products, but not for others. According to Forbes magazine, businesses offering services don’t enjoy much success with this technique, since they’re not tangible in the same way as products.

While free trial offers are a great idea and do work in some instances, they have to be entered into cautiously and after some planning. If you do the prep work, then there’s no reason not to give them a shot.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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