In a 2005 MIT study, “Zero as a Special Price: The True Value of Free Products,” the power of free was demonstrated by offering Lindt® Truffles & Hershey’s Kisses® , first at 15 cents for the Truffle & 1 cent for the Kiss, then at 14 cents for the Truffle & the Kiss offered for free. The participants could only choose one.
The Results:
When the Kiss was a penny & the Truffle was 15 cents – the selections:
The Kiss = 14%, The Truffle = 36%, None = 50%- When the Kiss was free & the Truffle was 14 cents – the selections:
The Kiss = 42%, The Truffle = 19%, None = 39% - In a 3rd round, the Kiss was still free & the price of the Truffle was reduced to 10 cents – the selections:
The Kiss = 40%, The Truffle = 12%, None = 48%
What We Learn
As marketers, there are many take-aways from this study, including:
- With regard to promotional pricing: while the actual dollars and cents may be the same, the BOGO promotion (buy one, get one free) may perform far better than 50% off.
- Free is powerful – but it still may not influence the audience if the perceived value is not there. 39% of the participants didn’t want the free Kiss.
- Price reductions may influence the cost-benefit perception with other associated products (test 3).
The Research
The study was conducted by Kristina Shampanier, Nina Mazar and Dan Ariely in 2005 and contains additional tests, examples and data that sheds light on the power of free products and their influence on purchasing decisions. I highly recommend downloading and reading it – a truly interesting read.
Additionally, Dan Ariely has recently released a book, Predictably Irrational, and should you want to further explore how the world often works according to principles of irrationality in the places where we least expect it, give it a try.
(And, keeping true to our last post, New FTC Guidelines Affect Bloggers & Social Media Marketing, - Seven Aspens, the publisher of Dallas Marketing Services, is an authorized affiliate of Amazon, should you feel so inclined to click on the book and buy it.)
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