As consumers, we love free.  My father loves free so much that if there were a table full of rocks and a sign that said “free”, he’d keep taking them until his pockets were full (and then some).  But as business owners, there are times when free makes sense and then there’s “nobody buys the cow if the milk’s free”.

So, when should you use free as a strategy and how can you best leverage it?

Using free for experience

Experience is critical for a business owner to perfect his services. At some point in our lives, we pay for experience aka education (such as school, learning seminars, or instructional videos) and sometimes the opportunity presents itself to gain experience by giving goods and services away for free.  If you are a speaker, you need to perfect your speaking chops in front of an audience before you can get paid for it.  If you are opening a restaurant, you may want to do a few unpaid dry runs before you open to the public.  If you design software, you may give away free copies of the software in the beginning to garner feedback and identify glitches.

These examples of free make sense, as they allow you work out the kinks of your business, your new product or service.  The key with this type of free is to know when it’s time to move on.  How many speeches do you do pro bono before you start charging?  When do you know you are good enough?  When will enough issues be worked out in your software to sell it?  Set these benchmarks ahead of time.  You may need to adapt them along the way if you are not making the progress that you anticipated, but it needs to be a temporary tactic.

The strategy of “free”

Sometimes, there is a benefit to doing something for free because of the value of the association.  You may loan your time or your product to a blue chip company because having worked with them will legitimize your business or expose your name and products to a large number of people.  If you are doing something because of credibility, have a strategy to get more from it.

If you use this free strategy, make sure that it’s only when you are first starting out or that it only accounts for a small portion of your time or sales.

Also, to maximize this strategy, see if you can double down.  If you are giving something for free, ask the recipient if they can do something for you in exchange for your generosity.  If you ask for something that is easy for them to do and costs nothing, you are very likely to get them to say yes.

Perhaps the company you are donating free items to will promote your products in their newsletter or run an advertisement on their website.  Or if you are doing a free speech, you can ask to sell products at their event or be introduced to event sponsors who may also want to hire you.  Even use your free gig as a stepping stone; explain that you aren’t in the habit of doing work for free, but would be happy to do so as a way to build a relationship.  Then, identify the key decision makers and after you have done a good job with your free offering, parlay it into a paid business relationship.

At a minimum, make sure that you benefit from publicity.  Publicize your association working with this organization on your website and in your newsletter.  Also, don’t be afraid to ask the company to publicize it for you too, if appropriate.  You can increase your odds of success by making it easy to do. Write a blurb or press release for them; then they don’t have to do much work. Plus, it will have the slant that you want it to communicate.

Using free for trial and education

Sometimes, free educates and entices folks to learn and try your product with the hope they will purchase some of it, or perhaps something else altogether.  Andrea Lee dubs this “pink spoon marketing” after the little pink taster spoons of ice cream that Baskin-Robbins gets you to test a flavor and then buy a cone or a sundae.

There is also a move towards “freemium” products, especially in industries like tech.  This is where a low-featured free version is offered, and once the user is hooked, they are enticed to upgrade to additional features for a premium price.

The key to this free strategy is having something to move them towards and ultimately, closing the sale.  If they like the ice cream, make sure to charge them for the cone. If you are going to offer the product in a stripped-down free version, make it easy to move to that upgraded version.

Using free for added value

Finally, free can also be a way to take price competition and flip it onto its head.  Instead of cutting the price of your service or product, include something else of value for free (particularly something of value to your customer that is of little monetary value to you).  For example, a rock band can offer a free meet-and-greet with the band to provide incentives to fans for coming to a concert or a publisher could offer a free eBook when a hard copy of a book is purchased.

You can even use this strategy to get people to sign up early for an offer or to buy multiples of an item.  For example, in my book launch, I had free incentives for purchasing multiple copies of The Entrepreneur Equation, ranging from a PR audio series up through a fashion doll.

While many people frown upon the concept of free, it can be very effective.  However, in every case, the strategy behind free as a tactic needs to lead to getting paid.  Have concrete goals in mind, because working for free over the long run isn’t a business, it’s volunteer or charity work.