When Coca-Cola got started, they gave away a lot of free Coke.
As you can see from the free coupon image above.
Coke gave away free samples to customers and free syrup to drug stores and restaurants.
It was by far the cheapest way to get retailers to carry it and customers to try it.
Free Is Magical While Discounts Aren’t
Because free works magic in a way that discounts simply don’t.
Most businesses screw this up.
First, they prefer to discount rather than give something away for free.
And when they do offer FREE, they often wimp out on their offer by reverting to smaller sizes or service offerings.
Don’t be that business.
Don’t discount. Make it Free, full-sized, and compelling. Just like Coke.
Free Doesn’t Impact Pricing Perceptions, While Discounts Do
While Coca-Cola has given away free product, they’ve pretty much never discounted.
Walmart brand sodas are discounted down to a fraction of Coke’s price. But Coke retains its premium.
And this is the interesting thing about FREE as compared to discounted.
If you discount your prices by 30%, you will invariably and inevitably harm the public’s perception of your “real” value.
The public thinks that if you’re “still making money” at a discount, then the discounted price is — or ought to be — the “real” price.
Yet offer a product or service for FREE, and everyone understands that it’s a limited-time thing, and of course you’ll have to quickly return to your “real” price.
So whenever you’re tempted to discount, don’t.
Instead, give some sort of value-add away for free.
A free value add can act as a compelling promotion without impacting pricing perceptions in the way that a discount would.
Or, if you must compete at a lower price point, offer a stripped-down version for a lower price that will now be that lower-tiered offering’s full-time price, which will never be discounted.
In sum, Full Price and Free are the only two price points you should ever need.
Of course, it helps if your full price is also a premium price.
This is where effective branding helps.
Because one of the major benefits of effective branding — above and beyond increased sales and market share — is increased pricing elasticity.