Always Look A Gift Horse In The Mouth

Free offers to startups

Why is it that large businesses offer tempting ‘free’ offers to startups? There are two reasons that I can think of:

1.      You, like every other startup, must spend money to get money into your business.

2.      Although many startups fail quickly, some succeed, and they want to be in on the ground floor with those that do succeed.

As a small business owner, you represent an immediate revenue opportunity, and are one of many, that added together, are spending a lot of money on advertising. You have the potential to provide long-term, increasing revenue.

The offer

No business is offering you anything for free. Even the largest businesses cannot afford to give anything away to you without compromising their own financial position and profits.

The common feature of all introductory offers is that, like drug pushers, they are offering you a free or cheap fix to get you hooked on their services for the long term. Each business wants you to become dependent, so will make the initial offer as attractive as possible.

As a startup owner myself, I’ve been offered ‘buy 1, get 1’, first $x free, free short-term subscriptions, low-grade free subscriptions. All of these are marketing tactics to persuade you to start using their service. Once you’ve had a taste of the service, the hard sell begins. You could be assigned an account manager, whose real role is to persuade you to spend more than your budget. Or you could be offered extra services at a discounted rate to grow your footprint and make it more difficult to leave.

Terms and conditions

All offers come with terms and conditions (T&C) attached. Often, they presented in long-winded, small print designed, like End User Licence Agreements, to be a combination of boring and unapproachable. What they really are is a combination of offer parameters and commercial contract. By accepting the T&C, you will be committing to the contract, yet most of us choose not to read them carefully, if at all.

In my recent months, I’ve accepted an offer for a stock image subscription, free for the first month and $x/month thereafter. However, I did not read carefully enough to realise that the $x/month price depended on an annual commitment once the free month ended. I escaped the contract only by paying the equivalent of two months subscription for a couple of weeks usage beyond the free trial.

In another offer, I accepted a ‘spend $x in two months and get $x advertising’ offer that fit with my marketing plan. The problem was that the vendor was entirely in control of the advertising and made it possible to spend most of $x but impossible to reach the target in the time allowed to achieve compliance with the offer terms.

In contrast, my website creation platform offered a month free trial, followed by a 12-month 50% discount. This seems generous but, as I’m sure you’ve realised, once they capture my website, it takes significant effort and expense to move it to another service. They are playing the long game, in anticipation of a full price subscription for years to come.

Risks

With so many companies trying to attract and capture startup business attention, there are significant risks to your limited capital that owners should recognise.

1.      Not all offers are as generous as they seem.

2.      Offers often come with an understated sting in the tail that trap the unwary.

3.      You may not always be in control of meeting T&Cs.

4.      All offers are made to benefit the offering business, not the purchaser.

How to choose the right offers

An introductory offer from a supplier can only benefit you and your startup if it fits with your strategy and plans. There is an obligation upon you to inspect product offers and select only those offers that fit with your plans. Don’t be tempted to change your plans to fit with an introductory offer.

Compare online vendors for their features using long term pricing because that is what you will end up paying once the offer has expired. Only once you’ve done this, should you see who is proposing a good introductory offer. The quality of an introductory offer should only be used as a tie-break between two very close competitors, rather than as a major factor in your decision-making.

Before you select a vendor and their offer, read the T&Cs very carefully. Look out for the wriggle room that vendors put into their contracts and assess it for the risk to you. Think carefully about your ability to meet T&Cs and how much influence you’ll have over the outcome. After all, if everything is controlled by an unchallengeable AI, where all you set is a budget, how much control do you really have?

Conclusion

There are many suppliers spending their marketing budget to capture the money that you are about to spend. They are all hungry and will often be ambiguous about the risks to you. It is your responsibility to select the right suppliers and to be fully aware of the contract you enter when you sign up with them, especially for online services.

Always look in the mouth of a gift horse when it’s provided by a commercial entity because there are no gifts in commercial relationships, especially online.

Caveat emptor; Buyer beware.