How do you make money by giving away shovels?
The best and easiest way to make money by giving away free things is the BOGO offer. You see them everywhere. Buy One Get One Free or BOGO. One of my favorite internet success sites runs a promotion a couple of times a year. If you buy one site with all of their award-winning services you can get a second site for free. They usually promote it as a way to give those services to your friends, family, and business associates.
At first glance that doesn’t seem like a very good deal for them. They are selling two sites for a 50% discount. Yes, it cuts into their first-year profits but the next year when both sites are renewed they win because they now have two sites renewing instead of just one. And they have helped two people create success online instead of just one. It’s a Win-Win-Win for all three parties in the transaction.
Gold Nugget: Why does BOGO work so well? There are a couple of reasons why this strategy works for this company. The first is that they are essentially getting you to endorse the product for them by offering to give it away to your friends, family or anyone else you might want to give it to. We tend to trust companies that are recommended to us by our friends. The second reason this works so well is because it is truly a value-added discount. Nothing says “Great Deal!” like getting two of something for the same price as one.
The Shovel Is Free: But You Want to Buy a Pick and a Wheelbarrow Don’t You?
Another way to earn money on giving away products or services for free is called the “up sell”. Have you ever wondered why every employee in the fast food industry says “Would you like fries with that?” Or “Would you like that in the Medium or the Large?”
By asking everyone if they want fries or if they want to up size their order they are creating demand for more of their product. If you order more you are increasing the amount of your purchase. And the fast food restaurant makes more money.
Example One: Pandora
One of the best examples of giving away shovels for free and the upsell is the streaming music service Pandora. You can listen to music streamed to your tablet, computer, or smart phone anywhere you go. And it’s free. While you listen, you will receive the occasional advertisement. That’s pretty standard. But, they will also offer to let you customize the app and get rid of the commercials for a small monthly fee. They pack a lot of value into their subscription service. And for only $4.99 per month you can customize your channels and skip the advertising. And for only $9.99 you can download music, play any song you want, customize playlists, and skip the advertising. See, what they are doing there. They are adding benefits and features.
A good upsell complements the product you are giving away for free. It adds benefits or features that make the product even more valuable or useful. And it usually is priced to be very enticing. Pandora Plus is priced at less that $5 per month. If you choose to pay for a full year upfront they will give you 12 months for the price of 11. That’s about $54.99 per year. Once you have accepted the idea of paying $4.99 for a few extra benefits it’s easy to get you to accept the idea of paying just a few dollars more for better and more benefits.
Example Two: From E-book to Membership Site
A top-level guru gives away his E-book explaining how to create a large mailing list. You will have to give him your name and your email address to receive the download link for the book.
Gold Nugget: The real reason the guru is giving you the free shovel is to get your email address and your name. The free shovel (E-book) is your reward for sharing your email address. By having your email address, the guru can engage in building a relationship with you by sending relevant information, newsletters, and helpful advice that will help you be successful. Of course, they want to sell you products too. But, they know that by building that relationship with you it will benefit you and them over the long term.
When you go download the E-book you will receive an upsell offer explaining that the guru has created a package of tools that can automate all the work of creating, managing, and curating your email lists for a very low one-time price. The offer page details the numerous benefits and features of this package. It explains the tremendous value. You can see that it is easily worth several hundred dollars. You must have it. And if you take advantage of his offer right now you will save 90%. But, the offer is only valid for 30 minutes! Literally he is offering you a $100 deal for only $10. But, you must act now!
Why would they sell you a package worth several hundred dollars that could easily sell for $100 for only $10? There can be any number of reasons but the two most common ones are:
Generate Excitement and Create Referrals
One reason is that he wants you to brag to all your friends about how you got this great deal. Remember, people will be more likely to buy something if their friends recommend it. By practically giving away the package with so many benefits they are helping to create excitement and generate word of mouth advertising. And they are more likely to have sales from your friends if you endorse the product with excitement.
The follow on offer or yet another upsell
Another reason is that they probably have a second upsell waiting in the wings. After you buy that awesome package of tools that will help you build your email lists there is a second upsell package that features a membership program with a recurring monthly fee.
The membership program allows you to consult with experts simply by going to a chat room. You can browse the directory that has hundreds of suppliers offering discounts to the members. Every month a new training video is posted to the website giving you key insights into how to build and grow your internet business. By the time you read about all the benefits and features of becoming a member you can’t imagine why he is only charging you $14.99 per month. In a very short period of time you have gone from free to spending $180 per year for valuable tools and resources that help you grow your business.
And our guru can promote other products and services that add value and are useful to his network of people that he has carefully cultivated. They carefully evaluate every offer that is sent to their group to be sure it offers useful and valuable benefits that help them or are something they need. When other gurus or business approach them about selling products or services to his membership group he will negotiate a better deal for them than the regular public gets.
Gold Nugget: In gold mining terms you give away the shovel so you can sell them the pick and the wheel barrow. But, you never give away a broken shovel or sell a poor-quality wheelbarrow. You want to develop a relationship of trust and integrity that ensures that the miners trust you, refer their friends to you, and want to keep doing business with you.
Stop and think about your hobby, passion, or professional knowledge. I bet you have a free E-book with a couple of upsells just dying to be created. Or maybe you have a video inside you showing people how to build bird houses that every bird for miles around will want to live.
Whatever your passion, skill, talent, or hobby is there is a really good chance that someone wants to learn about it. And if they want to learn about it you have an opportunity to engage with them, build a relationship, and upsell them.