Why does Red Bull do free giveaways?

Welcome to the 7th edition of the GrowthX Newsletter. Every Tuesday & Thursday I write a piece on startups & business growth. Today’s piece is going to 95,300+ operators & leaders from startups like Google, Stripe, Swiggy, Razorpay, CRED & more

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Why is Uber giving free rides for people taking vaccines?
Why did Bank of America sent $500 limit credit cards to 60K people for free?

Two words - Habit building
But, there’s more to that.

For Red Bull
The audience is always youngsters + extreme sports combination.
Sampling is focused on crowded areas. “Free” drives word of mouth.
Post few rounds of sampling, Red Bull gets shelf space in shops around the college(s).
This builds additional revenue pipeline.

For Bank of America
The audience was a small town with mostly BOA customers.
The card carried a heavy credit limit (first of its kind).
They never got the credit money back but got people habituated.
They eventually evolved the business model & built the credit industry.

For Uber
The commute habit is broken due to remote work.
There is a health concern with the shared commute.
The offer is sort of a PR plus getting back churned user strategy.

#Takeaway
How do you make free/sampling/trial work?
1. Always sample/trial with the right kind of user.
2. Run experiments to figure out a trial to habit loop duration.
3. What is the potential recurring revenue post habit loop is established?
4. What is the cost to recurring revenue ratio look like?

Next time someone in your team says “Let’s give away our product for free”.
Send them this issue.