Do free gifts build customer loyalty?

Some people love them, and some people hate them. I’m sort of in the middle. Retailers like boudoirbabe considering a 'gift with purchase' incentive (GWP) should think carefully.

GWP promotions can be very effective when it comes to:-

• Launching a new product
• Increasing product sales
• Raising brand awareness
  

Choosing an appropriate incentive that will either complement, enhance or add value to the purchased item is really important for a small business on tight margins.

However I've noticed that many BIG online retailers seem to use it as an excuse to get rid of crap they can't sell or simple don't want :-(

I like GWP promotions as much as the next woman for certain shops. However the cynic in me wonders if anything given away by a big company is of any value. If a major retailer is giving away something for nothing, then you can bet they're making the money back on something else.

What about Customer Loyalty, I hear you ask?
As a small business owner selling niche market gifts in a very competitive market, I try to see my business from a customers point of view. I want to reward customers who buy gifts from BoudoirBabe and recommend my online gift shop because they like the gifts we sell and because they've enjoyed the shopping experience.

Selling Someone Once Doesn't Make Them A Loyal Customer
Do I really, really want to attract bargain hunters who are are only visting my shop soley for the bargains - I don' think so.