Giving a customer free product can do heavy damage to a company's bottom line and doesn't always further a company's growth--especially in two-tier marketing arrangements. Taverns are a perfect example. Many tavern owners routinely squeeze free kegs out of microbreweries anxious to make a sale. Such giveaways have ruined many a microbrew house operating on light profit margins.

Alan Newman, founder and president of the fast-growing Magic Hat Brewery, in Burlington, Vt., borrowed a start-up tactic from the larger, now-established Boston Beer Co. Instead of giving in to demands for free kegs, Magic Hat offers promotional materials such as menu tents for tables and coasters that remind customers to order another frosty.

"I am trying to build a customer base, not make a tavern owner richer," says Newman. "To build a customer base, I need to generate more interest in my beer. This is going to help the tavern owner get richer too--just not as fast." Newman has rolled his brand into four states by using dry goods with the Magic Hat logo.

Copyright 1998 G+J USA Publishing