Sampling of information goods

With the development of information technology and the emergence of electronic market places, great business opportunities are created with reduced spatial restraints, lowered search costs, and increased diversity. Marketing practitioners have long been seeking ways to take advantage of the burgeoning technologies. As one of the most commonly utilized marketing tools, free sampling also has its online presence, especially for information goods that can be digitalized with ease nowadays. However, despite its wide adoption, free sampling has attracted little attention. In this article, we provide an analytical model to study the economic rationale behind free samples. We argue that with the development of computer technologies, even a less sophisticated Internet user can be an information provider nowadays. As a result, a "free sample" is less and less under control of a seller. In the context of our analytical framework, we find that this trend does not always hurt the seller. On the contrary, under certain circumstances, the monopolistic seller can be better off with the presence of the free samples provided by third parties. We further include advertising into our model. Based on our analysis, we argue that the decreasing search costs for free samples threaten the effectiveness of advertising. Copyright 2007 ACM.