The Power of FREE!
A few days ago, I wrote about the power of the word “New” to get our attention – if there’s a more potent attractor out there, it’s almost certainly “FREE!” For years, advertising gurus have listed “free” on every compilation of powerful headline words. Now, research conducted by Dan Ariely (a Duke behavioral economist, previously at MIT) shows us that “free” is far more effective than “almost free.” Indeed, a preference for “free” seems to be another feature hardwired into our brains.
Free Kisses Beat Bargain Truffles
In his book Predictably Irrational, Ariely describes a series of simple experiments that offered subjects something desirable – chocolate – at a variety of prices. Two types of chocolate were used – a Hershey’s kiss and a Lindt chocolate truffle. While the kiss is an inexpensive and common treat, a Lindt truffle is a far more tasty confection that costs an order of magnitude more than the kiss.
The first experiment offered subjects a truffle for 15 cents (about half its actual cost) or a kiss for 1 cent. Nearly three out of four subjects chose the truffle, which seems logical enough based on the relative value of the offers.
The next experiment reduced the price of each product by one cent – the truffle was offered at 14 cents, and the kiss was free. Although the price differential remained the same, the behavior of the subjects changed dramatically: more than two thirds of the subjects chose the free chocolate kiss over the bargain-priced truffle.
To see if the appeal of the free kiss was based on convenience (not having any change, having to hunt around in a purse for coins, etc.), the experiment was repeated in a cafeteria food line where the cost of the chocolate could be easily added to the total purchase. Even with the elimination of paying inconvenience, the free kiss was still the overwhelming choice.
Ariely attributes the preference for “free” even when the rational choice would be the bargain item to an aversion to loss. In essence, a free item carries no risk. He may well be right, though I think another explanation is that, to our hunter-gatherer brain, a free item represents the proverbial low-hanging fruit. That is, a resource that can be obtained with near-zero effort. If, millennia before money and commerce came into being, I had just gorged on fruit and had an adequate supply of food stored in my cave, I would be unlikely to go looking for more food. But, if I was walking back to my cave and found a perfect apple hanging over the path in easy reach, I’d no doubt be tempted to pluck it and figure out what to do with it later. That apple would be, in essence, “free” – other food sources might involve climbing, stalking, traveling, or other kinds of effort.
Amazon’s Experience with FREE!
The most interesting example of the power of “free” in Predictably Irrational comes from Amazon.com. When they launched a “free shipping” promotion with the purchase of a second book every country except France showed a big jump in sales from the offer. The Amazon marketers investigated, thinking perhaps the French were rational enough not to be swayed into buying a second book. In fact, they found that in France the program had been slightly altered. Instead of zero shipping, the offer in France charged a mere one franc – about twenty cents. From a pure economic standpoint, the two offers are almost indistinguishable. In actual performance, though, the one franc offer caused no sales increase. (When the French offer was changed to FREE!, sales did indeed jump.)
Here’s the neuromarketing takeaway: FREE! is more powerful than any rational economic analysis would suggest. If you want to sell more of something, use that power. I often see department store offers like, “Buy one pair of slacks at regular price, get a second one for only one penny!” That may sound clever – “wow, pants for just a penny!” – but I think FREE! will outperform the penny offer. Want to spark sales of a product? Try offering something for FREE! with it. Want to get the widest possible sampling of a new product? Use a FREE! sample.
When NOT To Use FREE!
There are some cases when using FREE! isn’t the best idea. If you are trying to encourage sampling of a product that appeals to a specific audience, for example, a very modest charge will throttle demand but will eliminate most samplers who have no use for the product. For example, I don’t own a cat. I don’t even care much for cats. But if the supermarket had a big display of “Free Cat Food Samples” there’s a good chance that I’d pick one up, thinking that I’d give it to a friend. Or maybe hang onto it for when one of the inevitable stray cats shows up. Hey, it’s FREE! – I’ll grab it now, and figure out what to do with it later.
If Ariely’s research is to be believed, pricing the cat food sample at a mere ten cents would almost certainly slash inappropriate sampling by people like me. A few legitimate cat owners might avoid the sample, too, but the overall cost/benefit of the program would likely improve.
Chris Anderson, author of The Long Tail and editor of WIRED magazine, will release a new book about FREE next year. But, you don’t have to wait – start harnessing the power of FREE now!
Great blog entry. I have used the FREE idea in many marketing things. We sell computer hardware and service. We often do a “Double your RAM for free” coupons. Honestly I have had a lower redemption of these than I thought. I also have tired half price things with limited response. I think I will try to do more FREE offers. The question is does FREE with purchase of something else work well also or does that have limited success?
This is very powerful information. Thanks for writing about it!
Jason, I don’t think “FREE” causes our brains to completely stop functioning. 🙂 While I’d expect that a free add-on would boost sales more than a heavily discounted add-on (as shown by Amazon’s accidental experiment), the success of the free offer will likely depend on a variety of factors. The base price of the product, the appeal of that product, and the perceived value of the free item will all come into play. A free laptop if you buy one laptop will have people lining up at the door; a free USB cable may attract little or no business.
We launched our new product this week and I am currently testing different treatments of the word “free” to encourage signups for the free beta product. So far the dark red large “free” with a yellow starburst is the winning graphic and the words “Keep your credit card in your pocket” on our signup form is also the winner.
Interesting post 🙂 since I just did some research on Red Bull, I found that they also gave away free samples to party-goers and students to generate buzz marketing in their early days. And they did very well using this strategy.
I am looking forward to Chris Anderson’s new book as well.
Jenn, kudos to you for testing different designs/wording! There’s no substitute for measuring actual customer behavior. I like the “keep your credit card in your pocket” – that augments the “free” with no-hassle convenience, too. All to many offers that are supposed to be free end up with having to provide a credit card number… “FREE” is no panacea – think of all of the magazine offers that promote a “free issue” but are, in fact, commitments to subscribe.
FREE indeed is something netizens are always on the look out, free-ware, free-software, free-email, free-hosting of data/websites, blogsites and etc…
But this should not be used excessively especially if say for example has competitor, imagine you will sample a product only to find out that you ought to pay a fee to avail of their “free” services…
Then that software/service is marked for life and they will never see again people to their sites. So my advise be honest with what is free and what is for a “fee”.
Back in the 90s when I worked for Excite, I interviewed people for positions as high a level as “director.” A big perk, of course, was the value of the stock options. $10s or $100s of thousands – in a few cases even $millions. Granted, not everyone really understood how options worked. Even if they did, what was most likely to get them really jazzed was the offer of FREE beverages and FREE lunches on Wednesdays.
Julie, I’m guessing those free lunches ended up working out better than the options… 🙂
Roger, in the end, yes, the lunches were more valuable 🙂 But for a couple years there, Excite had a seriously good ride. Many multi-millionaires were made. But people *still* got more excited about the free beverages!
Comparing free lunches against potentially lucrative options probably doesn’t seem to make much sense, but there IS research that shows immediate rewards light up the brain more than bigger future rewards: Neuroeconomics, Asymmetric Paternalism, and Marketing.
In addition, options are kind of intangible… no current value, unknown future value, one step removed from ownership, etc. Food, on the other hand, is a reward that has multiple ways to entice us. Thanks for sharing that experience!
Here’s a different sort of example:
I grew up in Wisconsin. Our yard was full of large and small glacial rocks. One day my dad had to dig up a large area of lawn for something or other, and ended up with a big pile of rocks. He moved them to the front yard with a sign saying “take what you need”.
No one was interested.
After a few days my sister put up a big sign that read “FREE Rock Garden Seeds”. They were gone in an hour.
Of course that could just be attributed to creative marketing 🙂
I arrived here after reading Guy Kawasaki’s blog… The title read: “Free Power”
I wonder if he did this to test the theory. It seems to work.
With today’s prices, “Free Gas” might have been an even better traffic driver, as well as made an insightful comment about the quality of writing here. 🙂
Enjoy reading your pieces where ever I find them (here, Futurelab, etc.). This kind of insight and the tie back to our hunter-gatherer days is a great way to strengthen an argument and lend it an air of validity. On the other hand, you get what you pay for, and a free bag of cat food might just be worth nothing if you just picked it up because it was free even though you don’t own a cat!
Thanks for stopping by, Anthony – I hasten to add that the “low hanging fruit” analogy is speculation on my part. To my knowledge no respected (or even vaguely disreputable) evolutionary biologist has made that connection.
Great post! There is definitely an interesting effect when things on TV are offered for free (but you have to pay for shipping and handling!)
Looking forward to Chris Anderson’s book next year, will it be offered with free shipping though?
It is a bit ironic to pay for a book about “FREE.” 🙂
I have to admit I also love free things..^^ but I also agree with you, most of the material things that come for free are not really that of great value.
Any opinion/research on the impact of words describing FREE? Complimentary? Gift? I’ve heard it said that FREE can devalue the brand? Also, does FREE create an expectation for further FREE products – and, again, devalue your proposition? An ex-TIME magazine marketer said that when you sign up subscribers with a free gift their renewal rate is low, because they only signed up for the gift – and they’re not getting one each cycle. Any thoughts?
FREE can be an attention-getter and might induce customers who don’t want the primary offer all that much to sign up anyway. Then, when it’s time to pay, they decide to cancel.
It’s analagous to pay-per-click marketers (who pay for every click to their website). Maximizing clicks isn’t a good thing if those clicks don’t convert into sales. Similarly, maximizing initial acceptances of an offer may not be a good thing if those customers end up not subscribing.
Special offers of any kind have the potential to devalue the brand, but adding a free product or service might be less risky than a straight price cut.
How do you find the Free time to write all this great stuff? 😉 Sorry, I couldn’t resist…
Glad you enjoy the site, Billy Jack. How do I find the time? It was either this or golf, and, based on my feeble golfing skills, I chose this. 🙂
Will FREE be inflated in he future? What will be the NEW FREE? These are the questions I’m spending my time with.
I wrote a book about giving as a business model. http://www.strategyofgiving.com. (Yes, the book free).
I loved the post, but I wonder why there is no mention whatsoever of the Free we are most familiar with … network TV, Google, radio, etc. These are not exactly free, maybe that’s why they are not included, but it seems to be an oversight, since you do mention things that call your attention as Free but then later require a fee, or there is the expectation of paying for S & H … I’d like to know how FREE stacks up the way we are most accustomed to free. Advertisers pay our fee for us … hope that’s in the book.
Actually, Cole, Anderson’s book will most likely focus on what you are talking about: FREE as a business model. My post is focused more on the promotional use of the word FREE and how that word seems to fire up our brains.
I recently started to distribute a line of Organic Blood Orange Juice from Sicily. I was thinking about handing out samples in Union Square Green Market NYC and offering people a free bottle if they can sign up their local grocer to purchase goods. I would also list the grocer for free on our web site (www.iojuice.com) as an outlet to purchase in our “where to buy” link for other people who might live in the area to purchase. What is your take on this approach???? Need help !!
I call the the word “FREE” and other triggers like it “consumer buttons”. Those buttons you can press on consumers to get action. I find alot of the dialog in marketing is around branding and positioning, which is great, but at the end of the day your job as a marketer is 1 – to build a brand, and 2 – to make consumers consume.
I work in retail marketing, for new stores we offer a “FREE” bag of goods worth over $100 for the first 300 customers who spend over $20 on the opening morning. We consistently have over 100 people lined up to get in the stores, the biggest I’ve seen is 700 people. This creates its only momentum as the group mentality takes over. People want to get what other people are getting.
Great topic to bring up!
Wow! I love free things, but Sometimes “free” stuff can be very expensive.:)
“Free” is a funny concept, I think, because in the end it is more highly valued than “cheap” or “low-cost” (as this article demonstrates.) So where is this value being compensated for by those supplying it? Or in other words, when you sample free stuff from a company, if it is so highly valued and not compensated monetarily, where does the company profit?:-S
I’ve thought through this many times and I think it comes down to ROI. There’s gotta be some sort of balance between quantity of free products/services, and profit (kind of like a supply-demand curve? If this already exists excuse my ignorance, I’m not formally trained in economics lol.) I wonder though if that’s something that if it doesn’t exist already, would help businesses to maximize profit… a specific example of this-sometimes I wonder whether it’s more profitable for a software company to provide limited functionality “free versions” of their software , or a limited-time full-functionality trial. Or maybe that depends on exactly how limiting the former is.
I think laziness is also a factor. Like the “low-hanging fruit” thing. There’s probably a ballpark amount of money people are willing to spend for purposes of convenience or saving time. Personally for me that amount is fairly high because I’m lazy 🙂
Simple examples: you can cut your own hair for free, in theory; the time investment involved in having enough knowledge of hairstyling, and in actually cutting your own hair – which is more difficult anyway – is what you’re paying a barber for. I think it’d be interesting (and probably also useful economically) to find out how much value people place on convenience and how much difference there is individually.
I’m sure you are right, RJ. The “free” experiments with the truffle/kiss controlled for the convenience factor, by the way – the effort to check out was the same either way, so there wasn’t a “gotta fish in my pocket for change” factor.
The software question (free limited versions, or free full-featured but time-limited trials) is very interesting. From my personal point of view, I would always take a functionality-limited but time-unlimited version over the alternative. Even though time-limited trials are often advertised as “free trials”, in that case my brain kicks in to make me think about what I’m actually getting for “free”. In the case of a limited version, I might get something that is less valuable or powerful than the purchased version, but still might turn out to be useful for me, at no risk. I get a product that is actually mine to keep and try, so I can figure out if I like it. If more advanced functionality requires a purchase, so that the developer can make a profit, I can see the economic reasoning behind it, and appreciate that I’m given the choice on whether to go for that upgrade or not. In the time-limited trial, however, I get immediately discouraged from taking up the offer, because even on a subconscious level, I understand that it’s not really something I “get” for free, but I get to sample something that will be taken away from me again. Basically, the purchase decision is delayed, but not avoidable. I also feel subconsciously pressured, because there is always a clock ticking behind that free offer, I don’t get to evaluate it in my own time, so most of the time I’d rather not go for the trial at all, even though it’s technically free and risk-free (although, of course, many of those free trial offers have sneaky ways of automatically turning into purchases or subscriptions, which might also be an explanation for my aversion).
Good analysis, Daniel. I like Evernote’s model: provide a highly functional tool for free that works for 90% of the market, and offer an easy upgrade path for those users that really need it. Those users will be the ones who have fully integrated Evernote into their life, and who won’t object to a reasonable fee to expand the capacity of the tool. They demonstrate it’s not necessary to convert 100% of the user base to paid – a business can thrive with lots of free users as long as enough pay to cover development and support costs.
Hello again Roger! Your post about free stuff definitely piqued my interest. Great book recommendation too! I’ve read a good chunk of Ariely’s Predictably Irrational and it is a solid and entertaining read. Oh, and I gave you a shout-out on my latest post at I’ve Tried That: http://www.ivetriedthat.com/2013/02/25/why-giving-away-free-stuff-actually-helps-your-business/
Looks like “getting rich” isn’t rocket science– it’s neuroscience!
So true, especially when you see online offers that are “free” but you end up paying too much for shipping and handling.