The economic paradox of the “freebies” phenomena: How and why companies give stuff away for free

Abstract

Purpose

The paper aims to report the findings of a research study into the “freebies” phenomena – the provision of free goods and services by companies. Such activities are seemingly an economic paradox because they should not occur in a profit‐based organization – either privately owned or publicly owned where there is a fiduciary duty to maximise the return for the shareholders.

Design/methodology/approach

Examples of freebies are given and used to construct a typology together with the underlying motivation or rationales for the provision of the freebies, as well as a determination of who pays for the freebies.

Findings

A major step forward in understanding the concept of “freebies” is achieved with the construction of the BIGI Model which identifies the four main reasons for freebies provision being Brand building (including new product launch), income generation, government legislation and information gathering.

Practical implications

This paper provides substantial insight into how “freebies” can be effectively utilized as a direct marketing tool and, alternatively, common errors to avoid when employing the use of “freebies”.

Originality/value

While the use of free samples of products has been widely employed by firms over a number of years, there has been no real systematic evaluation of the process in terms of its efficiency as a direct marketing tool.

Citation

Rudzki, R.E.J. and Li, S. (2007), "The economic paradox of the “freebies” phenomena: How and why companies give stuff away for free", Direct Marketing: An International Journal, Vol. 1 No. 4, pp. 180-194. https://doi.org/10.1108/17505930710836960