In the software world, the “Freemium” model exists to get users to try out a new service, hopefully like it, get hooked to it and then ultimately start to pay for it because their continued usage triggers some kind of threshold.
So what’s Freemium’s offline counterpart? In some sense, “Sampling”.
That’s what purveyors of new products – shampoo, candy, toothpaste, cereal, etc. – do when they want to introduce something to the public, are not sure if the public will actually like it and pay for it, but want to test the waters beyond focus groups and such. (But it differs from the “Freemium” model in that sampling is a once or twice kind of thing, unlike a Freemium service which could well go on forever. Consider a Dropbox user today that’s might always stay under the 2GB threshold…)
How importance is it, to the rise of new brands and products?
Consider the now-ubiquitous Kind bars. Caroline Fairchild, writing about their rapid spread across the US had this to say:
in 2008, private equity firm VMG Partners invested in the company, although it will not disclose the amount.
Kind bars were sold in just 20,000 locations when VMG got involved. The investors immediately put their capital to work to get the product into more people’s hands with free samples. (CEO) Lubetzky’s sampling budget was $800 in 2008, and he was reluctant to increase it, but by 2009 that budget ballooned to $800,000. Today, Kind spends upwards of $10 million in efforts to get people to try Kind bars. The company has a full-time field marketing team in 25 U.S. markets that organizes sampling in stores, sponsoring sporting events, taking free samples into corporate offices and putting them in gift bags at company events.
The full article touches on other aspects of Kind’s rapid growth – and for anyone (interested) in the CPG space, should make for an interesting read.