Published on 19 Oct 2021

Why giveaways don't always work

Free trials may not be effective at attracting new customers, according to a study led by Asst Prof Sadat Reza of NTU’s Nanyang Business School.

Giveaway

Businesses often use free trials to encourage customers to use their products. However, this marketing strategy may be less effective at attracting new customers, according to research from NTU. In the study, the researchers collaborated with a major mobile phone operator to send 60MB of free mobile data to subscribers of their mobile phone services.

Contrary to their expectations that nonusers of mobile data would be the ones most likely to use the free data offered to them, the researchers found that customers who were moderate users were the most likely to take advantage of the giveaway. The research also found that if there was an option to forward the free trial to peers, existing customers were 50% more likely to redeem the offer.

“Our research shows that for ‘experience’ goods—for example, a holiday destination, a movie, or a new software, where value is only discovered after consumption—free trial campaigns should be targeted at existing customers who are familiar with the product, instead of new users,” says Asst Prof Sadat Reza of NTU’s Nanyang Business School, who led the study.

The article “Don’t count on free trials to win you customers” was published in Harvard Business Review(7 January

2021).

The article appeared first in NTU's research & innovation magazine Pushing Frontiers (issue #19, August 2021).