It seems counter-intuitive: making money by giving away your product or service.  Indeed,  without proper planning, that’s a strategy that can lead to lost customers and revenue.  Keep these three issues in mind before you take a ride on the “giveaway train” – and it derails your business.

Bandwidth, Testing, & More BandwidthFreeTickets

In June, the Tex-Mex chain, Moe’s, debuted online ordering through the Web site and released an ordering app for download. The chain offered loyalty club members a free burrito when they either ordered online or used the app to order during the kick-off period.  Oops! The ordering site was quickly overwhelmed, the app was buggy, and unhappy customers took to the Web to complain.  A sample comment:

“This app does not work. Clearly overloaded, the app would not find stores, create an account, place orders or do anything at all. It is ridiculous to launch a promotion that your app cannot handle. “

So instead of happy customers chowing down on free burritos, a group of hungry, unhappy people complained about the poor execution of the giveaway.  While the chain reacted quickly by admitting the error, correcting the problem, and promising a new promotion in the future, it still took a hit.  Management was managing damage control instead of the roll-out of a cool new service.

If you’re launching a promotion where you expect site traffic to be higher than normal, make sure your site can handle the load.  Customers who visit the site and get an error message instead of the expected “freebie” aren’t likely to return.

Don’t Give More Than You Can Afford

The Cincinnati Reds’ pitching staff’s strikeout success this spring resulted in some big payouts for a local restaurant chain:

A local restaurant chain promises free pizza for ticket-holders any time Reds pitchers whiff at least 11 opponents. It’s paid off six times already in the season’s first three weeks, resulting in more than $100,000 worth of pizzas being given away by LaRosa’s Pizzerias.

Management says that the money spent on the giveaway is more than offset by increasing the visibility of the chain and encouraging traffic into the store.

Small businesses have to be particularly careful with giveaways.  Don’t just place a coupon on your site or a “free night’s stay” or a free meal and allow anyone to download it as many times as they want.  You may find yourself so swamped with non-paying customers that your regulars get shoved aside.  You can still promote a giveaway, but with limits.  For example:

  • Special for the First 100 Customers!  A promotion with a specific size limitation encourages people to use it immediately.  You can plan for the extra demand because it will take place in a certain time frame.
  • Coupon Valid June 10-12:  This date range means you can appropriately staff your restaurant and stock up to handle the rush from the promotion.
  • Subject to Availability:  If you’re offering a free night in a hotel or a free plane ticket, be sure to set availability limits.  You don’t want a dozen families showing up with free coupons on the night your hotel is already totally booked.

Control The Promotion Costs of the Giveaway

Decide how you’re going to promote the giveaway.  The least expensive option is to do it yourself on your Web site, inside your store, and using your social media contacts.  But start-ups generally don’t have that customer network in place yet and are hoping to use the promotion to begin building it.  Those businesses should consider paid options:

  • Social media ads:  Facebook offers multiple targeting options for ads – geography, demographics, interests, etc. and also give you a decent amount of control over spending.
  • Online advertising:  Costs for this vary widely and so do results! This is an area where it’s definitely worth hiring a professional who can advise you about the best, most cost-effective options.
  • Blogger outreach:  No matter what you’re selling, somebody, somewhere is blogging on that topic and might be interested in reviewing your product or property.  You’ll have to comp them a meal, a free night’s stay, or send some product samples.  Other larger sites will promote your giveaway to their audience – for a fee of course.

Do your research before agreeing to either of these options.  Some of the people who contact you with an offer to do a review or feature your business don’t actually have a large Web presence.  They just enjoy snapping up stuff for free.  And before you pay a site to promote your giveaway, check their Google rank, domain authority, number of Twitter followers, Facebook fans, etc. to make sure that their audience large enough to justify the cost.

Promotions and giveaways are excellent ways to promote a business and excite customers about new products and services.  By all means, use them, but only after careful planning and evaluation.