Way back in 1887, Coca-Cola came up with a novel idea to market their newly formulated drink. They offered drug stores two gallons of coke syrup in exchange for names and addresses of people within their neighborhood. They will then mail coupons for one free glass of Coke directly to these leads. Naturally, those targeted thus always would want to give the new drink a trial. Why not? After all, it was free. The drug stores now had to keep on replenishing their stock of coke, to meet up with rising demands.
Demands went through the roof and by 1895, Coke was being sold in all the states of the U.S. By 1913, It’s estimated that one in nine Americans had received a free coke which translated to a whopping 8,500,000 free drinks served.
So, Coke’s success as the dominant soft drink brand today was built on this campaign fuelled by barrels of free drinks running into millions.
But how?
Free stuff it seems, has a way of opening up people’s minds and wallets.
Go to your email inbox and search for the word “free. In a matter of seconds, you’ll see more than a dozen email subject lines containing the word “free.”
“Free ebook: the ultimate guide to Online wealth.”
“Register for your free training now!”
“Your free video with new info!”
“Urgent: claim this free guide now.”
Even before the advent of the internet and email, these headlines have been popular with marketers and promoters ever since humans learned to sell. But why is this four-letter word so frequently and freely used in sales?
It’s evident that, given the popularity of the usage of the word by salesmen, it has a significant effect on getting people’s attention. And consequently, making them more likely to comply with whatever request that follows. That brings us to the main question.
Why Do People Love Freebies?
The psychology of Free elicits a response that is somewhat unusual from the norm. It pulls people to where marketers want them to be and urges them to take further specific steps. How is this so easily achieved? Here are some reasons why free is compelling:
- Because our brains are designed to want to get something valuable for nothing. To achieve something with little or no effort. Who doesn’t feel and love the euphoria that comes with the feeling of having the upper hand in a bargain?
- When you discover a free offer, it often feels like you’re special for qualifying for the gift. That you have somehow earned it. With your ego thoroughly massaged, you feel good about the brand that made the offer and will be more inclined to doing business with them.
- When offered a free item, be it software, free food, a guide or an ebook, your mind naturally expects so little from the offer, just because of the free tag on it. But then, your attention is drawn to the offer because: what is there to lose? Why not try it out? You then click on the large orange button or perform any of the actions conditional to the free offer. If the product lives up to expectations, however, you’re then left with a positive impression that will make you trust and purchase from the business. And even more importantly, you’ll be left with a need to give back.
The Case for Reciprocity
In his 1984 groundbreaking work – Influence: The Psychology of Persuasion Dr. Cialdini proved that the principle of reciprocity was why free has such an effect on us. You could be sufficiently impressed by the taste of the free mini pizza bagel that you’ll order the whole lot. A free coke might program your taste buds to want more. But the real reason the word free packs such a ferocious punch is that we are hard-wired to return a favor.
This is why you would look for a way to grab the tab the next time you go out on a lunch date with a friend who earlier did the same. And why marketers know that the branded keyring gifted to customers will make them more favorably disposed to buy – as a way of returning that favor. Even if the keyring will be as useful as an ashtray on a power bike.
We always feel obliged to return favors which is why savvy corporations spend millions of dollars on promotional materials knowing they’ll make all that money back. Humans, it seems, simply hate to feel indebted to others and will quickly want to settle the scores.
With this understanding, you can now see why giveaways and promos have such a positive impact on businesses.
How Businesses Use the Word “Free.”
There are several ways companies apply the psychology of free to boost sales. Here are the more common ones:
Freemium
This is mostly used to sell software such as games and Apps. A basic version of the software is provided free of charge. But the user must pay a fee to enjoy the premium services offered in the form of extra features. These features should significantly enhance the user’s experience for them to be willing to part with cash to get it.
Buy one, get one free (BOGO)
This type of free offer is probably the most prevalent. You buy a product and get an additional similar or lower priced item for free. The idea of getting more for half the price is enticing and will make you more likely to buy more than you originally intended. This usually leads to more sales and possibly attract lots of new customers.
Free* (*Conditional)
Here, a highly appealing gift is offered to you when you make a purchase. The free gift is sufficiently enticing enough that you’ll spend money to buy something (even when not needed) just to get it.
Free trials
Mostly used by streaming services like Netflix and Hulu, free trials allow you to enjoy services for up to a month free of charge. You are not required to commit to paying to continue using the service at the end of the trial period. That is what makes it work so well; most users will enjoy the service so much that they pay to continue.
How Businesses Benefit From Free Offers
In 2011, 7 -eleven celebrated the anniversary of their Slurpee by giving away about 4.5million small-sized Slurpees. Interestingly, there was no commitment required from consumers – no coupons, no requirement to make a purchase before getting a free Slurpee – you can just grab as many Slurpees as you wanted.
Results? Slurpee sales increased by 38% on the first day. Incredible right?
The convenience store believed their good fortune was because the free Slurpee tasted so good that people had just to order more Slurpee once they sampled a few.
Sometimes one pays most for the things one gets for nothing– Albert Einstein
The free offer also drew a lot of attention and had people flocking to the 7-Eleven stores. There, the free Slurpee left a positive impression. And thus, not only were they more inclined to buying more Slurpees, but they also purchased other items sold in the stores. After all, there’s only so much sugar you’ll want to consume.
It seems counter-intuitive, but businesses do make money when they give away useful appropriate items. If done correctly, a free offer will cause an increase in sales and offset the initial expenses. Same reason why Costco offers free food samples.
Here Are Some Ways the Psychology of Free Benefits Businesses:
Affordable advertisement
A free trial is a great and affordable way to advertise your products. You showcase its features and allow your prospects to see how good your product is. Once hooked, they’ll keep coming back for more. It will then be easy to convert them to paying customers. And customers that are sufficiently impressed with the product and the free trial will gladly tell others about it. This word of mouth referral will get even more people to sign up for a free trial which means more sales.
Gives your business an edge
A giveaway promotion done rightly will set your business apart and give you an edge over competitors. This is true if your industry rarely does giveaways. If your competitors regularly offer free trials, then your customers expect it from you.
Valuable feedback
You can use a free trial to collect feedback from users and refine your product or service. The customers who are not convinced enough to pay for the product are usually willing to give reasons why. This will help you to tweak and develop the product to overcome their objections.
The Penny Gap
An experiment that clearly shows the dramatic effects of “free” involving chocolates. People were offered a choice between buying utterly delicious Lindt truffles for 15 cents or the lesser Hershey Kisses at 1 cent apiece. As expected, 73% purchased the tasty Lindt truffles. Then, in a second scenario, the chocolates were offered with prices reduced by 1 cent – the Lindt truffles sold for 14 cents and the Hershey free. The results were as astounding as they were illogical. An overwhelming 69% of the people went for the Hershey’s Kisses even though the price difference remained the same.
The heavenly taste of the Lindt truffles it seemed, could not overpower the strong psychological pull of “free.” How come so many people perceived the free Hershey Kisses as more valuable? Enter the penny gap.
The penny gap is a term coined by Josh Kopelman, which describes the massive gap between a free product and a paid product no matter how cheap.
This is a psychological phenomenon that causes the human mind to misperceive value.
The penny gap makes it difficult for people to pay for something if they can get a similar item for free even if the free thing is of far lower quality. Therefore, sales efforts by businesses should focus on overcoming the challenge of convincing customers used to free products to buy from them.
The Bottom Line
As a consumer, getting something for free gets you a natural high. You feel much better and as a result, will be more favorably inclined to the offering party. This is what makes the free offer profitable for businesses – existing customers become more loyal, and new prospects are converted and made to spend their money.
