Freebie Marketing Case Study - Standard Oil In China
The case of Standard Oil in China is an interesting one, particularly from the perspective of freebie marketing. Standard Oil had a monopoly in the American market, and was looking to expand its business by branching out into the Chinese market. Standard Oil's owner, John D. Rockefeller, along with other executives from the company, decided to give away eight million kerosene lamps for free or reduced prices. By doing so, they in essence created a market for their oil in China. The company most certainly lost money at the outset by giving lamps away for free or for less than they were worth, but they more than made up for the lost revenue once Chinese customers began purchasing oil for these lamps from Standard Oil. China went on to become Standard Oil's largest market in Asia.
What Standard Oil did was create a market where there wasn't one. Prior to Standard Oil's entrance into the Chinese market, Chinese consumers were used to using vegetable oil, not kerosene. The techniques Standard Oil used to break into the Chinese market have been duplicated over and over again throughout the world, and are used to this day. Whenever a cable company offers a DVR for free with the purchase of their monthly cable packages, that's freebie marketing using the Standard Oil method. If a video game console is sold for cheaper than it's worth in the hopes that consumers will then purchase a variety of games to play on the video game console, that's also freebie marketing using the Standard Oil method. Another example of this is printers. Printers are usually sold at or below cost with the real money being made once consumers have to purchase refill cartridges.
Standard Oil is a prime example of a company using freebie marketing to their advantage. While it may mean initial losses, over time it can lead to entrance in a new market, increased revenues, and much more.