Valuable Freebies From Big Companies
Used predominantly as a marketing technique, major companies often offer freebies with the hope that they can entice customers away from a competitor or to consider a product that they might not have considered before.
24/7 Wall St. reviewed offers for free goods and services from eight large companies. We defined "free" based on whether a company actually incurred a cost in order to offer the freebie and whether it actually gives the customer a tangible benefit that can be measured in dollars and cents.
Below are eight valuable freebies, what it costs companies to offer the deal and how much the customer actually receives in terms of value.
Surfing the Web at Starbucks
Starbucks (SBUX) now offers free Wi-Fi in all of its U.S. stores. One of the unusual aspects of the Starbucks offer is that the company does not require anyone to buy coffee or food to use the Wi-Fi connection. It is likely, however, that the deal is encouraging customers to visit the store and increasing sales.
Cost to company: Starbucks needs to pay for a router and broadband service from the local cable company or telecom provider and install a wireless device in each store. Starbucks may also be foregoing a portion of the $3.99 fee AT&T charged customers for wireless connectivity at stores.
Cost and benefits to consumer: Patrons now have unlimited and free access to the Internet, regardless of whether they buy anything or not. Users also get free access to certain content, such as The Wall Street Journal online, which is typically only available for a fee.
What the competition offers: Many independent coffee shops have offered free Wi-Fi for years as have bookstores like Barnes & Nobles and Borders; McDonalds notably added it this year.
Toyota Takes Some Sting Out of its Loans
The largest car company in the world offers 0% financing for up to 60 months on a number of its most popular models. Typically, automakers make up the difference for such promotions by jacking up the price of the car. But given the highly-competitive auto market and Toyota's (TM) image problems (thanks to a series of recalls this year), the auto maker isn't raising prices on its vehicles.
Cost to company: Toyota and its financing arm, Toyota Financial Services, do not have free access to capital interest so they are, in essence, paying for the interest payments.
Cost and benefits to consumer: Chase charges an APR of 3.62% on a 60-month loan on a new car. Other banks charge similar rates. So it's safe to say a car buyer saves approximately $2,740 on a $30,000 car loan.
What the competition offers: Buick, GMC, Cadillac, Chevrolet, Ford, Lincoln, Mercury, Nissan, and Infiniti also currently offer 0% APR financing on some models.
Learn a Thing or Two at Home Depot
The home improvement chain offers free classes on everything from installing locks to laminating floors. In fact, the company's "Home Improver Club" offers such a broad array of instruction that a diligent student could basically build their own house if they attended all of the classes. Of course, Home Depot (HD) promotes its products at the workshops, but students don't to buy a thing at the store.
Cost to company: The company provides the space for classes, presentation material, and pays for the teacher's wages.
Cost and benefits to consumer: Customers learn how to do their own home improvement projects for free, no purchase necessary.
What the competition offers: Lowe's, Home Depot's main competitor, also offers free classes, as well as an online library.
Southwest Airlines Allows You to Over Pack
It used to be a given, but now it's a rarity: Southwest (LUV) is one of the only major airlines to allow passengers to check in two pieces of luggage for free. As carriers began feeling the pressure of falling traffic and rising fuel costs, the privilege of checking bags in for free all but disappeared. The issue has become so contentious that New York Senator Charles Schumer called on the Obama administration to ban airline baggage fees. For Southwest, the no-baggage fee policy has given it an added competitive edge. Not only does it offer some of the cheapest airfares on many of its routes, but now it can claim to save passengers $50 or more baggage fees alone.
Cost to company: The cost to the airline for the additional weight and handling of extra baggage is fairly significant. Weight adds to fuel consumption and handling requires ground crews and transportation. Most other airlines charge an average of $25 per piece of luggage, each way.
Cost and benefits to consumer: Southwest's passengers save approximately $50 per trip.
What the competition offers: No other major airline offers free checked luggage except for JetBlue which offers to carry one free bag. JetBlue charges $30 for the second bag, and $75 for any luggage beyond that.
Lincoln and Cadillac: The Oil Change Is On Us
The two car brands offer free scheduled maintenance, including scheduled oil changes, tire rotation, air filter replacements and a vehicle inspection. These and similar programs involve three- or four-year terms or 30,000 to 50,000-mile programs.
Cost to company: The car company and dealerships bear the cost of mechanics, tools, and parts, which can easily amount to a few hundred dollars.
Cost and benefits to consumer: Customers save the money that would be spent on scheduled maintenance, usually somewhere between $200 and $500 if done by an accredited dealer (a requirement to qualify for the free service).
What the competition offers: Audi, Lexus, Land Rover, Scion, Jaguar, MINI, Saab, Volkswagen, Volvo, and BMW all offer free scheduled maintenance to varying degrees.
Have an iPod with that MacBook
Steve Jobs & Co. hope to get its next generation of customers hooked on Apple (AAPL) products early. The company is giving college-bound students who buy a Mac computer, a free 8-gigabyte iPod. (Customers must purchase the iPod on their own and then mail in a rebate to get a refund.) The least expensive computer that one can buy to be eligible for this deal is the $999 MacBook.
Cost to company: $199 for each iPod that a customer would have otherwise paid for.
Cost and benefits to consumer: Students who would have bought a computer anyway, get a free iPod.
What the competition offers: Apple is the only consumer electronics company to offer a deal like this.
Netflix Delivering Free Movies Online
The DVD-rental company offers free unlimited streaming of movies and television shows online as part of an $8.99 monthly subscription. The service works with PCs and Macs, as well as the Sony PS3, Microsoft Xbox 360 and Wii game consoles, and Wi-Fi enabled DVD-players. According to Netflix's (NFLX) website, "Netflix offers the service for a one-month free trial, but the consumer has to proactively cancel. If you enjoy Netflix, do nothing and your membership will automatically continue on the plan you have selected for as long as you choose to remain a member." Over the past year, Netflix subscribers have increased 42%, which has corresponded with a 61% increase in customers that stream videos.
Cost to company: Streaming costs and expensive licensing of content make this a significant financial burden on the company. Netflix spent at least $100 million in 2009 to provide streaming video.
Cost and benefits to consumer: Subscribers need only to sign up for the $8.99 per month subscription to a basic Netflix account to receive unlimited streaming access.
What the competition offers: At the beginning of this year, Blockbuster launched its own streaming service, designed to function with multiple devices. The service has not been widely adopted however, probably because users have to pay $4 per rental and $20 per film purchase.
Sony Blu-Rays for Those Who Play
Sony (SNE) offers a free Blu-ray player with its PS3 game consoles. The price of the PS3 starts at $299 while a standalone Sony Blu-ray player costs $220 -- and that's for a low end-model. This may seem like an extremely generous offer, but Sony has some good reasons to do so. In 2006 and 2007, Sony saw an opportunity to control the high-definition DVD market. At the time, the only real rival to Blu-ray was Toshiba's HD-DVD. A number of analysts believe that the inclusion of the Blu-ray in the PS3 consoles was critical to Sony's victory in the format battle.
Cost to company: While the company is theoretically losing approximately $200 per unit by providing a $500 package for $300, PS3 sales have likely enjoyed a boost because of the addition of the Blu-ray. PS3 sales are up 118% first quarter 2010 compared to last year. Nielsen polled 700 individuals who wanted to buy a PS3 and asked them why. The most common answer, with 65% of the surveyed group, was that they wanted to have access to the Blu-ray player.
Cost and benefits to consumer: Consumers pay $299 for the PS3. A low-end Blu-ray player sold by Sony costs $219.99.
What the competition offers: While competitors like Microsoft's Xbox 360 have video streaming partnerships, Sony is currently the only company to offer a video game console/hi-def DVD package.