Incentives and the "Free" Culture

Happy holidays from Paw Pets!

This year each large Paw Pet (Crocobob, Hippolynne and Sharkiana) comes with a free purple, pink, or green Santa hat as long as supplies last. The hats are not only cute on Paw Pets but are pet-safe and fit comfortably on pups!

It's interesting trying to figure out what kind of incentives really drive customers to your product. Last year I had a few great events at local boutiques with good sales but always had leftover toys at the end of the day... Then on December 22nd of last year my mom bought some small santa hats that fit nicely on the toys to add a little cheer to my holiday display. To our surprise, not only did we get more attention, but people rushed to buy the toys expecting to get that hat too. When I informed them that the hats were just display items excited shoppers began bargaining with me: "what if I bought 2"? or "Throw in a hat and I'll send everyone I know to your website"? Eureka, I thought, we have to make and sell these hats next year! It's also nice for consumers because they don't have to buy a cheap "holiday toy" but rather can buy a great that can be used all year with a re-usable holiday hat.

Shortly thereafter I visited one of the wonderful boutiques that carry Paw Pets and found a PILE of little Santa Hats for pups (or children, I imagine) discounted at 75% off... they weren't selling or didn't sell nearly as well as the boutiques expected... And yet, I was up-selling from $25.00 to $50.00 simply by including a hat similar to these $5.00 hats that were now piled in the discount bin. What was the difference? Why were people willing to buy an extra Paw Pet just to get a hat that they could buy for $5.00 or less from pet boutiques or other retailers?

Although I have developed many theories and intend to test them this year, I believe what it really comes down to in the end is the idea of "free". People didn't mind buying an extra toy, spending more than they thought they would as long as they got something "extra" or "free". They were making a large purchase decision or bargaining excitedly just to get the little hats based on the idea that they were getting something for free... The idea of our new "free" culture and how to make money on "free" is discussed at length by Chris Andersen in his book "FREE". If you are in an industry where you can add value with something free, provide a free service and charge for the upgraded service, or if you are in sales at all, I highly recommend reading this book. I would suggest, however, sticking to the chapters that most relate to you and your industry.

I'll let you know how my Santa hat experiments go this year.
I hope you all had a happy Thanksgiving!
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