Each month, Quill Corp., a $1 billion office-supply company owned by Staples Inc., ships thousands of free Mrs. Fields cookies to its customers, along with their orders of pencils and pens.
The company has also given away weekend trips, digital cameras, and George Foreman grills. To cost-conscious finance executives, this is the stuff of nightmares.
But to Mike Patriarca, Quill's vice president of finance and operations, the millions of dollars spent annually on freebies is well worth it. "It's part of the cost of doing business," he says. The program was launched three years ago as part of a push to differentiate the company from its competitors. The giveaways are often tied to low-margin products that sell much better with an extra incentive, says Patriarca. And since the freebies are linked to order size, people tend to add products to hit the giveaway threshold.
At Dancing Deer Baking Co., a Boston-based maker of cookies and cakes that also offers regular giveaways, management calculates the impact of each promotion in advance, says vice president and director of marketing Geoffrey Klapisch. Dancing Deer gave out free cookies as part of a promotion during the Democratic National Convention in Boston. And its "Break the Curse" cookie, created for Boston Red Sox fans pining for a World Series crown, received mention on NBC's "Today Show" — exposure that the company, with about $5 million in revenues, "would never have been able to buy," says Klapisch. To determine more-tangible returns from the DNC promotion, he's tracking purchases by customers who received coded coupons with the free cookies to use in the company's online store.
Such measurements are crucial to the success of promotional programs, says Sridhar Balasubramanian, associate professor of marketing at the University of North Carolina's Kenan-Flagler Business School. "Good marketers should be able to capture the financial consequences of their programs," he says.