Small businesses often face tough decisions when choosing a marketing strategy. One common debate is whether to give away free products or take a loan to fund a marketing campaign. Both strategies have merits, but each suits different business goals and situations.
Giveaway approach
Giving away samples and free products can be an effective way to build brand awareness and trust. It allows potential customers to experience a product firsthand. This method can generate excitement and word-of-mouth promotion for new businesses or those launching a new product. It can also lead to positive reviews and increased social media engagement. However, the drawback is that it directly cuts inventory and profit margins. It also requires a calculated approach to ensure the right audience is reached (knowing who the audience is can be a great starting point for a new business).
A loan for Ads
On the other hand, taking a loan to fund a broader marketing campaign can provide a more immediate impact. With additional resources, a business can invest in targeted ads, improve its online presence, or launch a promotional campaign that reaches a broader audience. This approach can lead to faster growth. However, loans come with financial risk, and small business owners may not have the heart for that! The business must consider repayment, which can be challenging if the marketing effort does not generate the desired return.
Ultimately, the choice depends on the business’s financial position and goals. Offering free products may work better for a company that aims to build relationships with customers gradually and has the flexibility to sacrifice short-term profit. Borrowing to invest in marketing may suit businesses that need faster results and are confident in their ability to handle debt. Both strategies have their place, and the right decision depends on the specific needs and circumstances of the business.
Grace Nasralla is the founder and senior business blogger at BizReflections. She is a Co-Owner at HUDDLESPACE which provides small business owners with offices for rent. This year (2024), Grace launched a loose leaf tea brand and named it Brew & Scone.