That Whole Free Food Trend...

from the interesting,-but... dept

Over the past few months there have been a variety of stories about restaurant chains offering special "free" promotions and people keep submitting them -- such as this one about Denny's recent experiences with free food promotions. I haven't been posting such stories, because the economics of free food is very different than the economics of free content -- and I'm not sure there's really that much to learn from the restaurant examples. For the chains that have done this, it's been somewhat successful (Denny's especially, for leading the way). The free food has ended up bringing in more paying customers in addition to the "free riders," so it's paid off. However, it does seem a bit riskier than using "free content" in a business model. The marginal cost of offering up free content is nothing. The marginal cost of free food, however, can be substantial. So, while it's an interesting model to look at -- and the success of the experiments so far shows how "free" can absolutely work as a promotion -- I'm not sure the free food promotions really teach us all that much about the use of free in the digital realm.


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  1.  
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    Luís Carvalho, Apr 22nd, 2009 @ 12:40am

    Try before you buy

    I've allways considered that being allowed to try something before actualy buying it to be the best advertising.

    In this case, the food, is actualy the content. Although food is not reproducible as a digital content, the actual businnes as far as restaurants go, is not the food in itself.

    Sometimes when I go out with the family or friends for a dinner, I end up paying WAY more for the wine and desserts then I did for the food. And don't forget the tips. The couvert. In some cases even the valet parking.

    So, for a restaurant, food, is almost a negligible. What they make money of is the rest of the service.

    That actualy applies to the free content model.

    When you buy a CD or a DVD, what you are paying for is for the plastic, the paper, the printing, transportation, etc... The content is almost negligible. The content is actualy why you bother to buy, but, it is not what they are actualy making money of.

    I don't know what are the exact values here, but, knowing how much they actualy pay artists for the content, really says this much.

    Their businness is THE BOX. To the restaurant THE BOX is the Full service. To Music and Video companies, THE BOX is the media and package. But not the content. The content is a marginal cost that could easily be put down as advertising, because it's what it is.

    Hoping I made myself clear... :)

     

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  2.  
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    Anonymous Coward, Apr 22nd, 2009 @ 5:23am

    Re: Try before you buy

    You did make yourself clear, and you beat me to it.

    I absolutely agree with you. Having worked in a restaurant, I can tell you that once the lights are on, the griddles and ovens are hot, and the employees are there, the dollar bills are racking up pretty quickly. Anything that generates cash flow is positive.

    It has been a while since I have been in the restaurant business, but my recollection is that food is a relatively small cost compared to the cost of running a restaurant. Yes, you can spend an extra few percent on food in one day, but if it increases your traffic on other days by a few percent, you made out like a bandit.

     

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  3.  
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    C.G. (profile), Apr 22nd, 2009 @ 7:07am

    Greatly Disagree

    Mike,

    I'm surprised to hear you're not convinced that free in the physical realm can teach us much about the digital realm. In fact, I feel it’s a STRONG example of how free can help one make money.

    For years you've been saying free distribution has helped grow a fan base in the music/movie realm - sell tickets, t-shirts, special experiences, etc. - and Denny's promotion is no different. So you give away food like a meal or ice cream, coffee, whatever and, yes, you have to be very aware of the marginal costs involved, but if the experience (taste, convenience, service, etc) is remembered, that chain will be able to capture future business and take it away from others who - even with equal service and tasting food - will remember the special experience of the free food.

    Now, the burden on the restaurants is to keep up the good service and continue to innovate in the promotions to control costs but keep people engaged in the brand/service/product but that's no different than the music business either. No amount of free music is going to get someone to buy t-shirts if the experience of the concerts or fan interaction isn't enjoyable.

     

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  4.  
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    Chronno S. Trigger, Apr 22nd, 2009 @ 8:20am

    Re: Greatly Disagree

    I agree with C.G. here. I always use the free samples example when I'm arguing with people who say that free will never work. If you can make a free finite good part of your business model, than making a free infinite good part of a business model should be much, much easier.

     

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  5.  
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    Anonymous Coward, Apr 22nd, 2009 @ 8:58am

    Hey, where were you on the night those polo horses died? Well, I guess you can just beat a dead horse without actually killing it.

    How long has free been around?

     

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  6.  
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    Anonymous Coward, Apr 22nd, 2009 @ 9:41am

    Re: Re: Greatly Disagree

    You have brought out another point, in addition to that made in posts #1 and #2. I am more likely to purchase a product in Sam's Club after having tried a free sample. Yes, you end up reducing your margin, but increasing your gross margin. You may also have won a repeat customer.

     

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    Anonymous Coward, Apr 22nd, 2009 @ 5:56pm

    Is a concert the same as a song? When you ate the free snack at Sam's, did you then go and buy a different product? No, you liked the sample and then bought the product. With "free" music, you get the entire product, then you decide if you want to buy a shirt or go to a concert. To say the song and those other things are the same is wrong.

    Denny's gave people a free meal with the hopes they would return. They wouldn't be too happy if everyone who ate free at Denny's never went back. Music doesn't translate well to this example because you are giving away one product in hopes that someone will be a related but different product.

     

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  8.  
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    custom kitchen island designs, Nov 22nd, 2010 @ 9:50am

    custom kitchen island designs

    keep sharing very nice post

     

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