One lifelong lesson that my father taught me while growing up is that “there is no such thing as a free lunch”. This popular adage communicates the idea that it is impossible to get something for nothing. The phrase was first coined in the 1930’s and 1940’s when American bars offered “free lunch” to their patrons in order to entice drinking customers to patronize their business. The bars were willing to absorb the write-off of there food costs in order to capitalize on the revenue opportunity that came from the consumption of higher-priced, better margined alcohol sales.
However, those food items that were on the “free lunch” menu were often high in salt and those who ate them would end up buying more to drink to satisfy their thirst. The business upside was that more beverages were consumed, driving increased sales and realizing more profits, but the downside was the frequent, over-indulged patron whose zealous, often out-of-control behavior would cause costly damages to the establishment and business reputation. At the end of the day, that “free lunch” which produced more customers to the business would oft times be more costly than what it was worth.
Many direct selling companies offer this same type of “free lunch strategy” when they offer a free enrollment to the business at no cost to the customer. The prime objective here is to create and promote a market excitement and field enthusiasm that encourages new distributor sign ups to secure a top-line or ground-floor position in the company sales organization.
This practice is frequently used by new startups to promote new customer acquisition and to get the company growing and rolling in the marketplace. In fact, we’ve seen a number of new companies experienced a tsunami of new customers from the deployment of the “free signup” strategy when things are free. But, is this a good thing?