"Free" Extends into the B2B Space
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May 1, 2000 *3,700 subscribers* Volume 2, Issue 5
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READER COMMENTS

Our bulletin board allows readers to comment on trends and issues throughout the month. Please stop by to add your comments and see all the responses at http://ecmgt.com/bulletinboard.htm

Question of the Month

The topic for May  focuses on "Free" Extends into the B2B Space

Selected Answers of the Month

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There is no question that firms giving away free items works well in the B2C world.  In traditional direct marketing, there is no stronger response trigger than "free." There are a number of office supply businesses that offer free gifts to the person who places the order - a free office tote, umbrella, or tin of gourmet cookies.  Clearly, the incentive is not for the B2B "customer" per se, but rather, for the person making the purchase decision. 
(M.S., Minneapolis, Minnesota, USA)

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I absolutely believe that freebies will extend to the B2B community.  As a marketing tool, freebies are invaluable to draw people to your site and business.  You will always attract the attention of potential patrons (PP) who have an interest in what you're offering to begin with.  However, I think freebies draw the PP's who are on the fence about trying a new product or service.  Companies give income producing components of their businesses away all the time -- free shipping, 5% discounts for cash payments, free returns, the "baker's dozen" concept.  So, I don't see why freebies wouldn't continue in some form.
(L.R.)

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1. Giving away product in the B2C works.

2. I think that giving away products in B2B would work.

3. I think there are many companies.  The companies that work with Mastercard in their Small Business Connections must have a value added offer, which in many cases is a free item.

(S.P., Los Angeles, California, USA)

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Absolutely, YES, giving away products and services in the B2C world is a successful technique and it's already working in the B2B world. onProject.com gives you a month to try their on-line project planning.  I've been using it for less than a month.  I'll never go back to MS Project! PlanSoft is the other example of a freebie.  This is used for writing RFPs on-line.  You know the saying work smarter.  Well these 2 sites have made my job smarter not harder.

But, the next question you should ask; is how are these companies going to make any money?  And then do these companies become services or non-profits?
(S)

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Yes, it will carry over to B2B.  I am consulting for a company in the B2B space and we believe in the concept of a giveaway program. So much so that we planning on implementing one ourselves.
(Susan Phillips Moskowitz, Santa Clara, California, USA)

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I believe this trend will carry over from B2C to B2B. However, this trend will probably be a little different in the B2B space. In the B2C space there is usually a direct incentive to do commerce with the e-commerce vendor.  In the B2B space, the trend will probably address itself in 2 different ways to 2 different segments of the market:

1. For Start-ups.  The incentive in the B2B space will be to catch "rising star companies" and to provide them with the technical hardware, software, and consulting they require to become successful on the net.  In return, the alliance should create a revenue flow for the company providing the foundation for the startup.

2. For established companies, the incentive will probably be in the form of price reductions, prizes, and other "gifts" for doing business with the e-commerce site.  So, two types of incentives here - one to incent the new customer, and one to incent the returning or repeat customer.

(D.H., Mountain View, California, USA)

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I just read an article that suggested this has become a fairly serious problem on the net. The basis of the article was that consumers are getting so used to getting a free gift or "free freight" from websites that there is a significant drop in usage when a company does not offer "something for free".
(T.W. Minneapolis, Minnesota, USA)

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Yes, freebies is a very good and cost effective way to generate sales leads and engage our customers. The freebie concept may transcend from the B2C to the B2B space. However, the logistics of handling this may prohibit the widespread use of this concept.
(L.G., Silicon Valley, California, USA)

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The goal of the giveaway is to gain market share. Unfortunately, giveaways have become so ubiquitous that they tend to be ignored. (I looked at iWon.com for about two days.) In my experience, the giveaway dot.coms have little to offer beyond the giveaway and customers tend to drift away shortly. There is no true value to the giveaway. I will not advertise a product simply to get free e-mail.

Most B2B sites are not designed to attract new customers but rather to attract B&M customers to a new method (adventure?) of transacting business. Giveaways will have little value except in those cases where it can be demonstrated that it will attract new, non-B&M customers. Even then, what will the giveaway be. I am hard pressed to believe a B2B customer would be enticed by trivial items, and if I had a buyer select a vendor because they offered him or her a trip to Hawaii, that person would be out on their ear in second.
(M.P., Silicon Valley, California, USA)

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Well, you may call me a cynic, but I know that nothing is given away for free.  A loss leader or Gift w/ Purchase (gwp) and Purchase w/ Purchase (pwp) are successful promotional concepts that have been used for many years in retailing (I was previously employed for 7+ years w/ Dayton Hudson Corp).  Look at the gwp/pwp events that happen at the cosmetic counters.

Even though this type of promotion is extremely successful, it is a very big two edged sword.

The item you pick as your gwp/pwp must be something that your customer wants or thinks they could utilize.  If the cosmetic company picks the wrong combination of items for their gwp/pwp, the customer won't come in to purchase the minimum required amount of cosmetics to get the gwp/pwp.  Another side is that you are creating two customer expectations/behaviors, not company/brand loyalty.  Let's say a customer likes a brand of cosmetics and a certain department store.  If they need some cosmetics and they have become accustomed to receiving a gwp/pwp, they will go to which ever department store is currently running a gwp/pwp offer on their particular brand - not to the store they normally shop.  If their brand is not currently running a gwp/pwp and another is, you very well may loose them to the other brand for that particular purchase. The other behavior is that unless the cosmetic is an everyday need, they will not purchase until the next gwp/pwp offer.

The cost of the gwp/pwp has to go somewhere (just ask any accountant).  Think of the previously mentioned cosmetics industry.  How much lower could cosmetic prices be if the companies did not have to invest the vast sums they do in gwp/pwp promotions?  Would those lower prices then increase the frequency, quantity and dollars purchased?  Would there be increased department store loyalty and/or brand loyalty?  Would brand loyalty increase because their wonderful product is now affordable?
(D.H., Sioux Falls, South Dakota, USA)

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In the B2C world "giveaways" only work if your prime purpose is to attract eyeballs and customers.  Several of the models indeed were only created to establish a pool of customers with the specific intent of then selling off that pool of customers to a larger player.  With products "set top boxes" etc obviously here the intent is to sell the subsequent service,  an electronic "Razor".  Most of these customers are basically greedy and naive!  (No purpose in being nice about this) The give away worked because they do not calculate the real cost over time of the capability they are looking for. Indeed, down at the C world level, few can resist something for nothing and many, I fear, never effectively use the capability they sign up for. B2B is fundamentally different.  One tends to believe that we now have business people working business issues without fundamentally naive expectation!

I think that there will be those that try to leverage B2B with "giveaways" but that it is unlikely to succeed.  The scale is too large, the number of giveaways too costly, and both of the B's will in all probability, already have the facilities to get the job done.
(D.H.)

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Free giveaways in B2C (e.g. first vitamin order free, up to $20) remind me of trade-show giveaways -- they get a lot of people to visit, but the percentage of high-quality leads is diluted.  The net effect: you make a lot of people aware of your presence, and they go away with either a mildy positive feeling about you, or with the sense that you were foolish to let them take advantage of you and get something for nothing.  Good for an advertising vehicle, not so good for generating real revenue. 

However, I have seen substantial discounts work effectively.  People expect to get a price advantage via the Internet, but this expectation is seldom fulfilled, because delivery costs usually outweigh the list price savings. But when BN.com offers a $15 discount on a book order of $25 or more, or CDNow gives a third CD if you buy 2, the deal is definitely better than the going street rate, and I'm sure they establish many new accounts that result in repeat business. (A couple of those $15 coupons got me to order over $400 worth of CDs, and I'm a rather conservative shopper.)  The most important thing the discounts do is to stop shoppers from looking elsewhere on the 'net.
(Jim Schibler, Santa Clara, California, USA)

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I'm assuming you're not necessarily talking about promotional giveaways, but rather giving away the products or services that the business provides (e.g., listing of jobs; rentals, housing, etc.)  Giving away the products and services they provide means the e-business needs to bring in revenue another way.  When you've got millions of consumers coming to a site to get free services you can attract advertisers who want to reach this market. (Television advertising model--TV is free--advertisers pay to reach viewing audience.)

However B2B isn't the same market and using the "give away" model is more difficult.  The only way you could employ the same model is to have millions of businesses come to a particular site for free for something that they would otherwise pay for (e.g., online banking services).  The only problem is that the advertiser isn't guaranteed to reach the right market. Example: if the administrative person is using online banking to pay her boss' bills, she wouldn't necessarily be the same person who would make the decision to sign up for a new line of credit.

In B2C, the probability is greater that the consumer accessing the site is also the decision maker for future purchases, than for the B2B model.

I really can't think of where this "give away" model works in the B2B market.

B2B needs to look at the Internet differently.  Rather than attracting new customers and selling more services over the Internet, they need to look at ways to reach existing business customers more cost effectively and increase customer satisfaction (e.g., allowing their business customers to perform transactions themselves rather than having to call up and order products/services).
(K)

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I see a great benefit in B2C in giving away both products and services. But I would like to talk about pros and cons trying to differentiate them.

Product: it is very important for the consumer/customer to have the chance to "use" the free product. In this way he can "play" with it, evaluate all the capabilities, find the ease-of-use, and see if it fits. And what about from the company point of view? If the product is ready, then the company can only benefit of this promotion. 

Services: This is the best of the freebies. Consumers not only want "the product", they want added value. This can be easily done with free services. Quicken is a good example. How would you evaluate Quicken products versus Microsoft products? If you compare only the products, a feature vs. feature comparison will uncover almost the same features. However I like Quicken because the services provided by their web site: portfolio tracking, stock news, etc.

B2b is different than B2C. I do not see how freebie products can be a good marketing tool. I may be too much extreme (and funny), but I do not see GM using a fuel check valve in production cars just because it is free!!! This means that companies look for a mature product or they try to achieve a standardization of used tools and eventually they prefer not to "test" a product rather they prefer to "use" it. The product may be "tested" off line, in a testing environment or lab. However I see services, again, as the winner!!! Free services (such as search, tips, news, etc.) can be used by a company to improve their own daily quality and/or productivity.

Microsoft is a good example. I am a software product manager and, personally, I do not like having my products developed based on a beta and free version of a new OS. Too risky for the products that I have to propose to my customers. I rather have developers using the "old", tested and familiar OS. However, having MSDN on line is great!!!!. Tips, news and search are easily available for developers, solving immediately questions, finding tips for new techniques and so on.
(A.G.)

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I believe giving something away will temporarily attract someone's attention but long-term stickiness will eventually come down to how worthwhile and applicable the products or services are to the company.

Most companies must still look at all the ramifications of incorporating a product or service into their business or engineering processes before a long-term commitment is made.  Multifunctional operations have a way of forcing an evaluation of a product or service so I also believe that the "give-aways" get attention but may not get long-term use in the drive industry.  Example offers to provide vendor catalogs may not be useful if they cannot be incorporated in the Purchasing Process in a reliable and convenient manner.

Examples -- CD that provide standardized semiconductor device specifications and configuration information in a interactive manner will tend to get a design engineer's attention and business. Once a design engineer calls a part out then it becomes a part of the OEM product.  Companies that provide direct access to data files can provide a strategic advantage to the seller.
(F.L.)

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B2C Give Away has certainly been used as one technique to attract visitors / customers / return customers. On one level, every good website is a "gift" to its users. That will continue into the future. But giving away items that have a significant cash value may not continue too much longer. The market may be shifting, real profit may be increasingly important. When that happens, the free gifts will be reduced, ... other than the free gift of information.

Free gifts are not that large a part of North Amercian B2B business practices. In other countries, "free gifts" are common, e.g. the need for bribes to make things happen. I don't see bribes coming back in North America. I do see discounts and benefits to long-term customers as a continuing feature of B2B transactions. And "free" information on the company website.

The obvious "gift" is providing information that strengthens the business connection with the visitor. That's the whole idea behind B2B portals. They are currently popular and I see no reason why that will not continue into the future.
(R.F.)

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No, give aways very seldon create loyal customers
(S)

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Yes, I do think "giving things away" in the B2C mode works...People love free stuff, whether it's in the supermarket or the on the Net...I know personally I'll download free software from a lot of sources, but am VERY reluctant to "pay" for the latest upgrade...My reasoning is that I rarely feel I "need" anything "that" much ..can do with the free stuff and occasionally find the "pay" material a bit pricey. But what the free stuff does do is keep me coming around, poking around and looking at specific sites, reading through their material, exploring their links, etc.. And occasionally, I'll even click into an advertisers site as a result if I see something that interests me...I see it very much like the supermarket or maybe more specifically, the "specialty shop" model. People will come to buy something they "need" but while there will pick up a free sample or two and maybe end up shopping and buying another product as a result of being there longer. The longer you keep 'em in the store, the more likely the chance of a sale.  

I think the "free' concept could also work in a B2B model, maybe even more so... I'm just not sure how at this point because I don't know of anyone offering B2B services or Apps for free...
(O&O, Edmonton, CANADA)

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