Do you think you could give away your product for free, and still make good amount of money, or maybe even more? Does it sound like one of the standard internet marketing tips? If your answer is “no”, then I’m sorry but you are dead wrong. This is a lesson about how to position your upsells the right way, which I’ve learned (for free) while sunbathing in one of the tourist resorts in Greece.
In the northern part of one of the Greek islands – Crete, there is a small town – Hersonissos, and in it dozens of hotels and tourist attractions … making a long story short it’s a typical environment in such type of place.
One of more popular places where you can spend your time is a place called “Star Beach”. What you can find there is stuff like: swimming pools, water slides, sunbeds, palm trees, the beach, the sea, water attractions, a gym, good weather, the sun, and a disco in the evenings. My point is – everything you could possibly need on vacation is there. And what is the best thing about it?
The main product is free
(Just to make things clear. This isn’t a sponsored post although it might sound like one.)
What’s the main product? In a place like Crete, it would probably be great weather, the possibility of fooling around in the sea (or admiring it, whichever you like more), a chance to get some tan, having a good time in the swimming pool. All of these are the reasons why we choose that kind of place rather than a different one. These are the first decisions we make when we start to look for a perfect place for vacation.
On the other hand, the possibility of renting an ATV, for example, and riding it around the island all the time is probably not among your reasons of choosing that particular place, but still, many people decide to take this opportunity and rent the damn thing.
In Star Beach you get everything you came to Crete for, for free. You can enjoy great weather, swim in the sea, sunbathe, you name it.
“But wait a minute. This is what the hotel in which I’m staying offers as well. Why would I even need to leave it?” – you would probably ask. Well the difference between Star Beach and most of the other hotels lays in the quality of the product.
This place is so cool, so inviting, so clean, and offering so many different attractions (which a glance at half-naked people dancing in the foam to the sound of loud music quickly confirms), that when you enter it you immediately try to locate a price-list or someone with a cash register, but there’s no one… and soon you notice the big sign saying “FREE ENTRANCE”. It’s almost hard to believe.
So where do they make all the money?
They have other products to make money with. They are upselling like crazy.
So, as soon as you start enjoying all the things you came there for, you will start to notice that this place has a lot more to offer. Let’s start from the beginning. You want to lay on a sunbed instead of sand or grass? – $5.50. You want a sunshade? – $2.80. How about a small beer? – $5 (normal price in a regular store – $1.30). Or maybe you want to have some fun on a jetski? – $35 (or somewhere near that) … and literally dozens of other attractions.
This approach passes the exam perfectly there, and I think Star Beach probably makes a lot of money implementing it. The best thing is that there are really no unhappy clients. Because no one forces you to buy anything. There’s no scarcity.
Let’s do a quick analysis. An average guest probably leaves about $10-$15 there (some people spend a small fortune but some spend nothing … and this amount is just a big guess of course, because I don’t really care that much to do any real research). So would I pay $15 for the entrance? – maybe, but I would take a minute to think about it. Would I pay $15 for all the other stuff? – yea… I did, with very little hesitation.
Would charging $10 for the entrance (giving sunbeds and sunshades for free in this case) have changed their profits in comparison to the current model? Probably, but possibly not for the better.
No matter how much or little money you charge for your product you will still get less people on board, than you would have if you had, simply, given it away for free.
This is how this business model works, in a nutshell
You get to your client, satisfy their main need free of charge, and then try to sell something else to them (something related of course).
Is it a good model for your business?
Changing your business model to something like this is worth considering, because as you can see it has some advantages. BUT
It has some disadvantages too. What can happen is a situation when 1,000 people enter and no one buys anything, but it’s rather unlikely.
This model is obviously not meant for every type of business (if you’re looking for a more traditional yet still effective marketing approach, consider checking what the experiential marketing agency has to offer). It has the best chance of succeeding in businesses where there’s no direct connection between the cost of creating the product and the number of customers.
An example of such a business (something worth considering if you’re starting an online business) is an information product based business. The cost of creating the product is always constant, no matter how many customers show up. And what’s more, the cost was already incurred during the product creation phase… This is exactly the situation where you should consider giving such product away for free (the product which the client came for in the first place), and building a marketing funnel behind it.
Where you probably shouldn’t try to implement this model? If you are selling hot dogs, jumbo jets, TVs, cars, houses, then you probably won’t get rich by giving it away for free. (I mean all the business where creating 100 copies of something doesn’t cost the same as creating only 1 copy.)
What’s your opinion? Don’t forget to comment, and share your experiences if you’ve ever used this model. Or maybe you’ve learned some interesting business lessons during your vacation too?