Top of Mind: Free Giveaways Come at a Cost

-By Kenneth Hein

The idea sounds so terrific when it’s pitched in the boardroom that nobody would dare object. “This,” says the marketing chief, his voice assuming a solemn tone, “is a time of need for so many Americans. Let’s give something back.”

Oh yes, by all means, let’s. A free meal? Great idea! And why not? Paycheck-stretching Americans will love you for it. Heads nod in agreement around the polished table. The number-crunchers figure out how much free grub they can give away while still getting solid publicity without the margins going to hell. They think about the short-term bump in store traffic, then those ancillary purchases once the offer “drives trial.” The numbers don’t look too bad, and so they go for it.

This scenario is imaginary, but I’ll bet something awfully similar to it has been happening in conference rooms around the country. In roughly the past month alone, Denny’s, Quiznos, IHOP, Jack-in-the-Box, Arby’s and others have offered free food or drinks in an effort to build both store traffic and good will for their brands.

So what’s wrong with handing a guy a free sandwich? Let me count the ways. First off, so many chains are handing out free grub that the novelty’s worn off—so much so that what had been a premium is fast becoming an expectation. First it was: “Wow, I get a free burger!” Today, it’s: “Hey, where’s my free burger?!”

But the larger issue is that food giveaways—aside from bringing X number of curious people into your units—have few strategic benefits in the long run. OK, sure, you did bump up your foot traffic. But when your customers have showed up just for the giveaway, it’s hard to engender a true brand experience that’ll make a lasting impression or deliver a quality message for the products offered. After all, people are only in there for the freebie.

This is especially counter-productive if your brand is trying to send a quality message. Giveaways have this way of cheapening a brand’s image, and that’s never a good idea. Don’t just take my word for it, either. “The fact is that 99-cent value menus and food giveaways are bad for business,” says Andy Puzder, CEO, CKE Restaurants. “At Carl’s Jr. and Hardees, we have stayed the course with premium-quality burgers—not low-quality gut fill—while containing restaurant operating expenses. CKE, by the way, boasts the second-best margins in the industry behind McDonald’s.”

But, OK, let’s just say that our marketer knows that his giveaway is just a short-term strategy. Isn’t it still good for a little PR? Sure it is—and it’s also an invitation for the unavoidable mistakes that happen with mass giveaways to turn into complaints. Oh, I’m being a pessimist, huh? Well, let’s just start with what happened to Dr Pepper a few months back.

When the Unabridged History of Brands is finally written, Dr Pepper is very likely to go down as the creator of the most ill-advised giveaway ever. Of course, it had some help—namely, Guns N’ Roses. Just in case you missed it, the soft drink brand made a bet with all Americans: If reclusive vocalist Axl Rose ever came out of the recording studio with the band’s forever-deferred album, Chinese Democracy, every citizen gets a free Dr Pepper.

Execs were probably high-fiving until the album actually came out in November. Then the havoc began. Dr Pepper’s make-good took the form of coupons, but the redemption window was tiny and the Web site that dispensed them crashed repeatedly. What started out as a mean-spirited joke pointed at a singer named Rose only ended up getting millions pissed at a drink named Pepper.

hen there was Denny’s. Denny’s made a strong statement during the Super Bowl by giving away a free breakfast. It received a massive amount of press attention and, for the most part, came off looking pretty good. Denny’s CEO Nelson Marchiloi said in a statement after it was over: “We were hoping to reconnect with millions of Americans today . . . and we did.”

But at what cost? The TV spot cost the company $3 million. And while many people no doubt enjoyed a good meal on the house, there were still plenty of complaints on the Web about long lines and accounts of people leaving before they were served. There’s a saying that it takes 10 compliments to undo one complaint. That tends to get magnified when you weave the reach of the Web into the equation.

And so we return to Quiznos, which promised to give away a million free subs. All people had to do was visit a Web site and sign up—and then the troubles began. Allegedly, headquarters expected franchisees to foot the bill. Then it set a quota to lighten the blow. Finally, it just pulled the plug. Quiznos rep Rebecca Steinfort wrote off the complaints as a product of the blogosphere: “Certain blog sites think that everyone in the country had a bad experience, but the number of issues was very low. That’s one of the things about the Internet.”

It certainly is—and that’s the problem. Many people give equal weight to a blog post and a balanced news article. What kind of impression about Quiznos did they come away with?

According to Steinfort, Quiznos accomplished its goal of alerting customers to the fact that the chain has less expensive menu items to enjoy. She also points out, that brand can now uses the e-mail addresses it captured for direct-marketing efforts. So it’s not all bad.

Still, the fact remains that giving away free food is harder than you think. And which would you rather have: Customers coming in to spend money with a brand they love, or ones merely there to demand the latest freebie?

http://www.brandweek.com/bw/content_display/news-and-features/direct/e3i801548f98188f77a411a99cf1b839930?pn=2