Never Underestimate the Value of Giving Things Away

"Never underestimate the value of giving things away." I remember as kid hearing these words on a regular basis. In fact this philosophy was re-enforced so much by my parents in my younger years that it has become a part of who I am today. But, I'm also a businessperson who enjoys earning a living, and in business, our primary goal is to maximize profits. So we have what appears to be an obvious conflict here. How does one remain profitable, let alone increase profit levels if they're giving things away?

This really isn't a new concept. In the traditional business world it's been done for years. It usually comes in one of two forms or a combination of both. The first is giveaways that are used to lure customers into making a purchase or as thinly veiled advertisements. We've all seen these tactics. Contests you can win if you purchase a product, free Tupperware for applying for a department store credit card, a pen or a mug for every $20.00 of gasoline from a particular service center. You get the idea. We've also seen large companies and wealthy business owners throw a lot of money and/or resources at "good causes". I'm sure that some genuinely do this for the betterment of society. The skeptic in me though suspects that often this philanthropy is nothing more than an attempt to buy credibility and respect as opposed to earning it.

So how does all of this apply to online business and how is a small online businessperson able to capitalize on it? Actually, when we look at the online world we don't have to look very far to realize the potential value of giving things away. In fact much of the technology we use online was "given" to us by a few brilliant people who were more interested in sharing their inventions and ideas with the world than becoming millionaires. It should be noted that many of these people as a result of their efforts have in time done very well for themselves. They have earned a great deal of respect, a loyal following and incomes to match as a nice little bonus. Indeed on the Internet today there exists an entire culture of people with this mindset. Why do they do it? Why give it away for free? Are they crazy? The individual reasons are as abundant as the number of individuals but they all share one common thing. An understanding that by providing value to people, they will receive value in return. It may be money, fame, additional resources to continue with projects, respect or simply the feeling of accomplishment that comes with a job well done. Not so crazy...and there's a reason why quite a few fortune 500 companies are embracing the philosophies of the open source software movement. The business world can learn a lot from these ideas.

However, there has to be a balance when it comes to business. If you are in a position where you don't need to worry about profits and don't have any expectation of future ROI, fine. Give everything away and someday you may very well be rewarded. Unfortunately there is realty to contend with! The reality is that we are here to make money. So what can you give that won't hurt your profit margin? Lots of things! If you're really smart about you will actually be able to boost your profit margin considerably.

Consider all of the things you have in your 'inventory' of assets. This includes tangible items like cash on hand, products, etc. It also includes such intangible items (those that are more difficult to assess a finite value to) as knowledge, skills, time and the like. Now think about which of those you can 'afford' to sacrifice a little of.

Some people will take the easy route and decide that they will give away a tangible item (a product sample, a huge discount or a cash reward for example) as a way of enticing customers to purchase more. Now this in itself is not a bad thing. It's better than nothing. Remember the big department stores with their credit card applications? It must work. Right? Yes and no. It does have the desired affect in a limited way, but overall is a very short sighted approach. It provides an immediate payoff for both the business and the customer, but has no lasting value for either and therefore must be repeated over and over to achieve a lasting result. A much better option is to come up with something that will not only provide a payoff for both parties, but also build long-term value.

So what is value, why is it important, and how do you provide and receive it? The dictionary deals with the term as it applies to business and finance in several ways. The definition I like is "worth in usefulness or importance to the possessor". In a typical business transaction this is easy. You provide goods or service (transfer possession) which your customers find useful or important and they in return provide you with a payment (usually money) which you find useful and important. But we're talking about giving things away here so how do you receive your value? The answer is really simple. You build your value (that is the value you wish to receive) into your giveaway. Curiously, it's the intangible assets that are best suited to this.

Let me give you an example. Ken Evoy is very well respected in the online marketing world and is also a master at maximizing profits by giving things away. His company, SiteSell.com specializes in selling books, courses and software aimed at teaching people about e-commerce and how to be successful with it. In addition to the products he sells online, his web sites are a virtual treasure trove of free information on the subject. Now this may sound counter productive. I mean, why invest all of these resources in developing top quality products to sell and then invest more in developing similar things to give away for free? To understand this we need to look at Ken's business model. Most of his sales are generated though his 5 Pillar affiliate program (5PP). This free information acts as training material for his affiliates around the world. Given the quality of the material, (it genuinely has real value) it helps his affiliates become successful at what they do. This in turn drives sales to Ken's business. Here's the neat thing about it all. Access to this information is not restricted to just 5PP affiliates, but is available to anyone. Why would you give out information to just anyone, who could then take his or her new found knowledge to benefit the competition? It's a risk you take I suppose. I suspect that Ken has calculated this risk and realized the insignificance of it. The truth is that after reading through some of the free courses offered, many people will end up becoming one of Ken's affiliates. There are a few reasons for this. The material while being very neutral (not a sales pitch at all) in content is well branded throughout. This is a very subtle method of advertising. Ken writes this information himself and not only is he a respected expert, but he writes in a style that is very personable and genuine. One can't help but leave with a certain level of respect and loyalty towards him. Further to that, I'm sure that some people choose to purchase additional products based on their experience with the free "samples". So now, not only does Ken possibly acquire new customers, he also develops loyal affiliate partners for his business. As a bonus these new affiliates are already positioned to be successful having acquired much of the necessary knowledge. As you can see, Ken wins from every angle. And as for the other side (the customer)? None of this would work if the free 'giveaway' weren't valuable in the first place. They've already gained "usefulness and importance" from the knowledge that was shared with them. They also have a real possibly of gaining more in the future in tangible ways by joining the Ken's business as an affiliate. This is building value into the free offering at it's finest.

Now that's great for Ken with his expertise and years of experience, but what about the rest of us. I actually had an opportunity to test the theory of giving things away when I first started www.AtHomeBusinessNetwork.com. I had just put the web site up and was moving into the phase of actively marketing it. Anyone who has ever done this knows how tedious it can be and how long it can take to see any measurable results. I had come across www.emoneyreport.com recently and it had intrigued me. Firstly, because it was obvious that it was still a very new web site and secondly, at first appearance, it seemed that it was trying to accomplish much the same thing as I was. That would make us direct competitors, right?. After all we are both trying to generate revenue from the same sources and tap into the same traffic. I put all that aside, I came up with a list of complementary items that they offered that I didn't and vice versa. I then composed a well thought out e-mail to the owners of the other web site outlining how I felt that we could complement each other's services. I explained my belief that we could help each other's web sites gain traffic and popularity by referring visitors to each other and thus capitalizing on each other's marketing efforts. I further went on to let them know that I had a prominent banner placement on my web site which was currently under utilized. I informed them that I would be more than happy to place a banner for their web site in that location for a short time. All for free and with no strings attached of course. Was it a bit of a gamble? You bet, but I believe that people are usually pretty fair-minded and I wasn't disappointed this time. Within hours, I received a reply to my e-mail which was way above anything I could have expected. Not only where the owners of the other web site thrilled with my proposal, they had already reciprocated the favor by giving me front-page prominence on their web site. Traffic although still small, tripled for me overnight! It also looks like we will have a prosperous relationship with each other in the coming months or years through mutual co-operation. Not bad considering many would consider us to be competitors. The value in this case was for both of us in the form of less competition, the sharing of ideas and information, added value for our respective visitors, increased traffic and consequently revenue... and this is just the beginning. All for being polite and offering something for free!

If you take the right approach, there can be real value for your business in giving things away. You only need to evaluate your needs, those of your customers and apply a little creativity and long term thinking towards your goals. Build your own value into your offering and go for it.

Now go out and give something away! You may be surprised at what can happen.

Colin Plant is the owner and administrator of athomebusinessnetwork.com which is an online resource and community site for people have an interest in developing and running successful online home based businesses. He is also the principal of Concept Dynamic.

http://www.AtHomeBusinessNetwork.com
http://www.conceptdynamics.ca