The High Cost of Product Giveaways

Recently two major American restaurant chains, Popeye’s and KFC ran large promotions of their product.  Starting off with Popeye’s who in a nation wide promotion slashed the price of their regular 8 piece bucket in half from $9.99 to $4.99 for a single day and most recently KFC with their even larger new product promotion through Oprah giving viewers the opportunity to receive a 2 piece roasted chicken meal and biscuit for free.  From a short term consumer stand point this sounds  amazing, the idea that  there’s a recession going on and these companies are giving a little to help people out.  From a corporation point of view not only is this a flash pan promotion,  but as witnessed on media outlets  this promotion is actually becoming a frustration  for customers.

While this promotion was made with the best intentions, it seems that they didn’t consider the larger consequences. In this post  I’d like to play devils advocate  demonstrating why mass free campaigns  should not be on a companies radar for selling their product ,  after demonstrating a case that did the  the idea of free samples right.

So what are some of the problems with these large campaigns? :

1. Large Costs: Both of these companies will be taking a major hit when it comes to their bottom line with this promotion. To start off,  they face major promotional costs with a national campaign but there are also the significant costs of giving away product and reimbursing their franchisees.  Also an unforeseen cost is the temporary loss of regular paying customers as a result of this promotion, with long lines filled with people looking to get their free product paying customers with limited time and attention levels are more likely to avoid these restaurants till the promotion ends.

2. Lack of Relationship Building: Everyone enjoys a free product,  it doesn’t matter what it is , if its placed in front of them  they will want it because there is no cost.  The downside of this is that the consumer has little to no interest in anything else. In my personal experience volunteering  with the Canadian Liver Foundation, during  a promotion with the Women’s health convention the CLF  gave  away mesh shopping bags  which were a big success, people completely crowded the booth wanted to have these bags.

THE PROBLEM: the booth’s informational materials went completely ignored, people just grabbed the bag and left.  The giveaway defeated the purpose of  being there which was informing the public on liver diseases and the resources available to those who have them. Much like the Liver foundation , KFC and Popeyes wanted to expand their company awareness. KFC wanted to position itself as a place of healthy eating and Popeye’s wanted to increase its market position.  While both companies allowed  people to sample their product it created  little to no change in perceptions or connections overall with the company.

Giving something away for free doesn’t inform anyone or build long term loyalty to a firm, it may build some short term good will  but the bigger problem is that people are more interested in the free and not on considering the company on a deeper level.

3. Service Failure: Last and probably the longest lasting negative factor in giving away your product for free experienced through these campaign is when the promotion fails to meet expectations.  Within the examples of KFC and Popeye’s  deal seekers became angry and upset  when they didn’t receive the promised product (as shown in the following You tube clips):

Service failure like this not only builds negative feelings among coupon users, but negative word of mouth among those that they interact with as they describe their negative experience. A promotion like this  also effects the relationship held with current customers and franchises who’s regular habits are disrupted resulting in a loss of good will towards the firms.

Giveaway’s done right! : In a previous post of mine I discussed the case of Whopper Sacrifice, a promotion where consumers could get a coupon for a free Whopper by defriending 10 people they knew on Facebook. Yes it gives away a free product but here is what I felt they did right:

1.The Consumer was active in the process: instead of mindlessly printing off a coupon participants had an opportunity cost in receiving the product which was making the decision of which 10 friends they should  sacrifice. This was more than just getting a product, the person was actually forced to think and have a memorable experience.

2.It was limited: This campaign was not made open to everyone as it only ran for a short period and had a limited run of coupons. This decreased the costs and  demand on Burger King’s restaurants meaning there was very little opportunity for service failure for all parties involved . Also by creating  exclusivity this  also created a topic for discussion creating word of mouth for the brand.

3.Involved others: this promotion involved more than just the participant ,  those who were defriended were sent a notification that they were taken off someones’ friend list with a branded notice creating further discussion ( I’m worth 1/10 of a whopper wtf?!)  and expanding into a larger audience.

Many people equate free with being a good  idea , but  without a well managed campaign and a way to build stronger attachment to the firm what the campaign really works out to is taking on a large cost with little reward. While KFC and Popeyes got a lot of attention for these large campaigns they will probably fail to see any long lasting effect.

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  1. free greasy chicken is usually a good thing, i just hesitate to stand in line for an hour to save five bucks

  2. As well another problem with these campaigns, die hard fans of the company will probably stay in line while those the companies are trying to attract will see the lines and not bother. Thanks for the comment Nomad!

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