The Psychology of FREE
There is a price that is always hot. A price that we often will buy with little thinking.
That price is... FREE.
And who doesn't like free stuff? That's like asking who doesn't like to feel good. Free stuff not only switches on a positive emotional response, but it also makes us feel like we've discovered some hidden secret that entitled us to our exclusive prize.
The Psychology of Free In The Modern Day
Think free gift voucher websites, and look at the 3.8 BILLION search results for the word 'free' on Google. Even savvy consumer sites like HUKD and MSE have dedicated sections for free stuff. And look at how 'free stuff' makes people go nuts, courtesy of The Consumerist. Nuff said.
But is 'free stuff' usually worth it? That's the question.
Not according to studies by Shampan'er et. al (How Small is Zero Price? The True Value of Free Products), conducted at the Research Center for Behavioral Economics and Decision-Making. They believe that the word 'free' often tricks consumers into poor decisions.
Case Study 1
Here's an experiment worth trying now. Do this quickly and instinctively:
You're browsing HUKD, and a one time treasure hunt offer pops up. Pick either:
- (a) A £10 gift certificate for FREE!
- (b) A £20 gift certificate costing £7!
What would you choose?
According to results from Shampan'er and Ariely, you are more than likely to take the first (free) option.
This obviously doesn't make much sense economically, as the £20 certificate is actually better value, because assuming terms and conditions are same for both, you are likely to save £13 instead of £10.
Case Study 2
Now what about the following choices? What would you pick now?
A £10 gift certificate costing £1.
A £20 gift certificate costing £8.
Based on Shampan'er and Ariely's study results, the majority (64%) of participants now went for the £20 certificate.
But notice that we merely increased the price of each certificate by £1. The £10 certificate goes from free to £1, and the £20 certificate goes from £7 to £8.
It's as if by simply removing the trigger word 'free', most people now come to sudden realisation that the £20 deal is better value.
Why is FREE so Powerful?
Shampan'er and Ariely (2006) argue that the two major reasons are: (1) it makes us feel good (2) it has no downside. And because we think we pay nothing should our decision be wrong, we can't feel bad.
The experiment also goes on to test people making decisions over a Hershey bar or Lindt chocolate. It also delved into understanding how advertisers and marketers have utilized the word in their sales copy to generate an increase in sales conversions. Worth reading the original source, if you are into that kind of thing.
And the next time you get a 'BOGOF' offer, just beware you may not be in for as good a deal as you thought you were.
[How Small is Zero Price?] The Original Paper (PDF)