Free sampling As A Business Model – Money For Nothing

While the something-for-nothing business model has gone the way of Dionysian launch parties, two Web-based free sampling companies are trying to evolve into full-scale market research firms.

Both FreeSamples.com and StartSampling started their businesses by offering free product samples from their respective websites. But now, both realize that the real value of these offers is the information collected from the people who respond.

In fact, San Francisco-based FreeSamples.com admits it will likely change its name later this year to reflect the work it’s doing in partnership with United Business Media, a media research conglomerate. “The free sampling offer has become an actual hook to incentivize consumers to provide valuable insight,” says former FreeSamples CEO Jeff Malkin, who claims that two surveys sent to more than 200,000 of its sampling customers generated a 40 percent response rate.

That kind of customer data allows FreeSamples to target special offers to very specific consumers. “We’re using the offer to influence the behavior of consumers and result in increased sales,” Malkin says.

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Death Of Car Salesmen?

When automakers created the franchise dealer network in the 1910s, they believed they had invented a means of passing off enormous inventory costs to an army of salesmen. But as dealers became the sole point of contact with the auto-buying public, Detroit has often regretted the decision.

Today, simply getting a car to the customer adds more than a third to the sticker price. If manufacturers could just cut the dealers out of the picture, they could increase their margins significantly.

When auto shoppers started flocking to the Web to kick virtual tires years ago-8 out of every 10 car shoppers now browse online before making a purchase-carmakers believed they finally found a cost-effective way to make an end-run around the dealers. Nice try.

They ran head-first into a wall of state laws and other regulations that prohibit manufacturers from selling their vehicles directly to consumers-rules set in motion by Detroit itself decades ago.

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Why some startups fail

A couple of years ago. high-profile disaster Boo.com exemplifies everything that went dead wrong for dot-coms and the showy London-based urban sportswear site had to fire its employees and liquidate its assets. In a year and a half, Boo’s two Swedish founders had blown through roughly $250 million in venture capital. The spending spree resulted in lots of high technology but no sales.

Boo spent more than $25 million on a pre-launch advertising campaign, then hit the Web six months late. It set up distribution centers in the States and Germany, sprinkled offices around the globe, launched the Website in seven languages, and prayed that its pan-linguistic brand would catch on. It didn’t.

By the summer that followed, New York-based fashion portal fashionmall.com and British technology company Bright Station ultimately came to the rescue. Boo.com never lived again.

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