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Of course, not every business can give away product for free; but almost any business can nurture customer loyalty by giving away support, service, and advice as part of an after-sales package. Honda's not about to give me a free car ... but free support and services after the purchase will greatly increase the chance that I'll be a repeat customer.
But the idea that people can be "[getting something] from a superior service after giving away something inferior for free" worries me. If I understand what he's getting at properly then it all sounds like a pyramid scheme to me which is a model I have seen with frightening regularity online.
It's a bit like selling printers for dirt cheap but charging £££ for ink cartridges.