The Effects of Free Sample Promotions on Incremental Brand Sales

Bawa, Kapil; Shoemaker, Robert W.

doi:10.1287/mksc.1030.0052

Cited by 222 publications

(121 citation statements)

References 17 publications

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“…More recently, Gedenk and Neslin (1999) and Bawa and Shoemaker (2004) analyzed the impact of free samples on subsequent (paid) purchases. The former study found that distribution of free samples increased the probability consumers would buy the brand in the future.…”

Section: Research Backgroundmentioning

confidence: 99%

Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully

Pauwels

Weiss

2008

Journal of Marketing

123

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Moving from free to 'free & fee' for any product or service represents a challenge to managers, especially when consumers have plenty of free alternatives. For one online content provider, this paper examines (1) the sources of long-run revenue loss (through attracting fewer free subscribers) and (2) how the firm's marketing actions affect its revenue gains (through attracting paid subscribers). The authors quantify revenue loss from several sources, including the direct effects of charging for part of the online content and the reduced effectiveness of search engine referrals and emails. Their analysis suggests several managerial implications. First, managers should focus their price promotions towards stimulating new monthly subscriptions, instead of the current promotional focus on stimulating new yearly contracts. In contrast, email and search engine referrals appear very effective at generating yearly subscriptions. Meanwhile, 'free to fee' conversion email blasts are a double-edged sword: they increase subscription revenue at the expense of advertising revenue. Finally, further analysis shows the move was preceded by the build-up of momentum in new free subscriptions, which appears beneficial for the move's success. The decomposition and comparison of the sources of revenue loss versus gains reveals several tradeoffs facing companies moving from free to 'free & fee'.Keywords: from free to fee, online content, price, marketing communication, searchengine referrals, time series analysis, vector-autoregressive models. IntroductionA decade ago, Peterson, Balasubramanian, and Bronnenberg (1997) A prominent fear among content providers is the likely loss of customers to the many still free competitors. Moreover, the impact of marketing actions to stimulate paid subscriptions is uncertain given the general consensus among web surfers that "content is free" (Dyson 1995). Empirical findings on these issues are scarce, as firms feel uneasy sharing data with academic researchers for confidentiality and competitive reasons. When The NY Times moved to a paid version of its editorial pages, one reader commented, "The only thing the NYTimes will achieve is a reduced readership for its writers. No one will, nor should we, pay for online content. It's a big, free web out there."The ultimate abandonment of the payment system (on September 19, 2007) appears to vindicate these arguments, and illustrates the challenge content providers face online.In sum, despite high managerial importance, little empirical research has addressed the following questions facing companies moving from free to 'free & fee': 1) What are the long-run performance effects of such a move?In particular, what are the sources of revenue loss that may offset the revenue gains from user fees?2) What role do marketing actions play in the free-and fee-user response? In particular, which actions are especially successful in increasing free and fee subscriptions, for both short-term and long-term contracts?This research aims to shed light on these issues by fo...

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Section: Research Backgroundmentioning

confidence: 99%

Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully

Pauwels

Weiss

2008

Journal of Marketing

123

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“…True loyalty programs invest now for the future, commit now to the customer, and trust rather than demand trust. For example, free samples (a common up-front investment) provide future benefits such as accelerating future repeat purchases and yielding future category expansion (Bawa and Shoemaker 2004).…”

Section: Customers As Liabilitiesmentioning

confidence: 99%

Brand Loyalty Programs: Are They Shams?

2005

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Brand loyalty and the more modern topics of computing customer lifetime value and structuring loyalty programs remain the focal point for a remarkable number of research articles. At first, this research appears consistent with firm practices. However, close scrutiny reveals disaffirming evidence. Many current so-called loyalty programs appear unrelated to the cultivation of customer brand loyalty and the creation of customer assets. True investments are up-front expenditures that produce much greater future returns. In contrast, many so-called loyalty programs are shams because they produce liabilities (e.g., promises of future rewards or deferred rebates) rather than assets. These programs produce short-term revenue from customers while producing substantial future obligations to those customers. Rather than showing trust by committing to the customer, the firm asks the customer to trust the firm—that is, trust that future rewards are indeed forthcoming. The entire idea is antithetical to the concept of a customer asset. Many modern loyalty programs resemble old-fashioned trading stamps or deferred rebates that promise future benefits for current patronage. A true loyalty program invests in the customer (e.g., provides free up-front training, allows familiarization or customization) with the expectation of greater future revenue. Alternative motives for extant programs are discussed.so-called loyalty programs, reward programs, customer assets, customer liabilities, deferred rebates, customer lifetime value

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“…• Prefer occasional free tickets to frequent discounted offers (Bawa and Shoemaker, 2004;Dawes, 2004).…”

Section: How To Convert Free Ticket Redemption Into Regular Paid Patmentioning

confidence: 99%

Something for nothing: the free ticket myth

Müller¹,

Arthur²

2008

International Cases in the Business of Sport

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The Effects of Free Sample Promotions on Incremental Brand Sales

Cited by 222 publications

References 17 publications

Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully

Moving from Free to Fee: How Online Firms Market to Change Their Business Model Successfully

Brand Loyalty Programs: Are They Shams?

Something for nothing: the free ticket myth

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