08 March 2010 ~ 2 Comments

what’s the ROI of free?

Better Examples

I saw an ad in Golf Digest recently:  Taylormade is giving away 20,000 6-irons… register to win.  I found the magazine in the seat pocket on a recent flight, so I entered.  And guess what?  They just emailed me that I’m getting a free Burner 6-iron.

I began noodling the ROI of this free offer.  See if this makes sense:

- fully loaded cost of the 6-iron, delivered, including marketing, is $50… so the program cost is 20k x $50 = $1 million

- the margin on a full set of golf clubs is 60% of $800 = $480

- breakeven is $1M/$480 = 2,000 sets of clubs – thats the number TM needs to sell to breakeven

- so, they need a 10% conversion rate (2000/20000) in order to break even, if all of my assumptions are correct

- (there may be some influenced sales as well – if I love the 6-iron and buy a full set and play well and brag to my friends, maybe they’ll run out and buy a full set as well)

So, a whole bunch of golfers (they hope) request a 6-iron to try out and keep; 20,000 get the free 6-iron… and of those, 10% need to buy the whole set.  Does this make sense?

Let’s hope that only serious golfers would enter.  Though, it’s kind of weird to request one club, to tell the truth.

Does ‘free’ sampling lead to induced trial and conversion of something as ‘personal’ as golf clubs?

Would this work for a bottle/case of wine?  It works for magazines.

What I do not know is if 2000 full-set sales is a big success for a new line of golf clubs.  Seems low to me.

Am I thinking about this the right way?

2 Responses to “what’s the ROI of free?”

  1. Tom Kasperski 10 March 2010 at 9:47 pm Permalink

    Hi Jim,

    Your assumptions/math makes sense to me. A few additional thoughts:

    - It doesn’t seem they did much work targeting influencers: bloggers, golf pros, etc.
    - A 6 iron? I don’t play golf, but is there a club that would lead to more conversions? A pitching wedge? A 3 iron?
    - Was there a challenge? ‘Try it and if you don’t agree…’
    - Was there any follow up? Post a review? Join us for a free lesson? Join us to try the entire set at an exclusive golf club? Reciprocity works.

    There’s something interesting about getting consumers to take in an orphan, but it seems they didn’t go the full mile with this one.

  2. jimholbrook 10 March 2010 at 11:12 pm Permalink

    Tom, you raise some great points, which I hadn’t really thought about. I was focused on the ROI, not on how to make it a better, more integrated initiative.
    - why not get the triers to be facebook fans and get them to provide testimonials?
    - why not give the triers who convert special access to a private course, lessons etc?
    - like you said, why a 6-iron? why not the club of your choice? My personal favorite club, the one I know I can always rely on, is my 8-iron – why not let me try their 8-iron?
    - and what about following the triers who converted over time – to be able to claim something like, “the players who tried our 6-iron and then bought a full set saw their handicaps drop by an average of 3 strokes” – they could for sure use a claim like that to the triers who didn’t convert
    - it’s weird to indiscriminately send out 20,000 golf clubs – why not make applicants somehow pre-qualify first?

    So, you are right – they could have done so much more. Maybe giving away the free clubs blew their budget and they ran out of funds to fully execute the idea!