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Penny Gap Theory

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The four free economy models are Free samples, give the customer something for free giving them a sense of loyalty so they will want to spend more at your company. Free trial, give a product to try for free in hopes they will become paying customers. Complimentary goods a free product that brings in customers to spend more on other items. Truly free and driven by ads. Free samples the best example I can think of is when you go to Costco. People joke that they bring their dates to Costco to eat because of all the free samples. All those free samples bring in much more revenue to the store that it cost them to give the samples. I can’t tell you how many times I liked the sample and so I bought the product. Free trial the thing I think about the …show more content…

The penny gap theory is that there is more validity to a product that cost than one that is free. The model that the author used is magazine subscriptions. I have often wondered why magazines are so expensive on the newsstand but reasonable priced via subscription. Now I know. Magazines could offer their product for free and some do to an extent online but what a person pays for a product is directly linked to how much they value a product. People will value a magazine that they have to write a check to receive every year instead of one they get for free. Advertisers know this and they are more likely to advertise in a paid subscription magazine then on a free online one. It sounds crazy but it is true. You see people saving Life or National Geographic magazines forever but no one is going to save a local free magazine. The notion of free and how you are paid for something is changing drastically. There are more ways to pay for something than with money businesses are very smart in the ways that they get customers to spend their money. Creating a brand loyalty with customers by loosing a percent in revenue they gain more in the long

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