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A Backwards Sales Tactic: Freebies

Posted by Ngan Ton on Jun 29, 2018 8:00:00 AM
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At first glance, freebies can sound like a big waste of money. However, with a little investment and patience, freebies can go a long way in achieving some surprising results. Here are a few interesting conclusions driven by freebies and a brief explanation into exactly what happens.

Result: Customers Paying more for a freebie.

We make plenty of assumptions about an item based on its price tag. If the cost is
cheap, we assume the item is cheap. Following that logic, one would assume that a
free item would be deemed completely worthless. And yet a study in the Journal of
Consumer Research found that freebies gifted for an expensive or luxury purchase,
were valued as a higher quality products with consumers willing to pay more for the
item on its own.

But...that sounds backwards! The explanation has to do with how we process and
assign value. When given a product with an inexpensive price tag, you have a natural anchor to assign its value. But without a price tag, such as a freebie, we have to look elsewhere for cues to the product’s value. Research indicates that if the primary item (the one we paid for) is an expensive or luxury product, then the buyer associates the freebie’s value to the primary item’s price tag.

To fully utilize this information, consider pricing your products to offset the cost of
giving away freebies. However, your pricing must still ultimately make sense – whether it’s because customers are paying for better quality, exclusive brand name, or both.

Result: Customers think you’re gifting a lot more than you actually are.

In 103 Ways to Sell a New Product, we discussed examining areas where you’re already over-delivering and, taking advantage of the consumer's inattention to detail, marketing it as a bonus. For this tactic, we take a similar approach in creating a greater perceived value than the actual giveaway by taking advantage of the general public’s neglect to do math.

In experiments conducted for a Journal of Marketing study, researchers gave
participants the option of receiving a 35% discount off of their lotion purchase or
receiving 50% more lotion for free. Even though the price discount was a better deal, more people picked the latter.

The problem appears to be that consumers are generally neglectful when it comes to
calculating percentages, opting instead to rely on emotional factors to guide their
decisions.

In order to test and apply this, offer your visitors two bonus options – one marginally better than the other and leave it to them to make the choice. If your shoppers consistently choose to get more product for free instead of simply reducing their out-of-pocket costs.

Result: More customers buy in order to receive a gift.

Mystery gifts have the potential to double a customer’s purchase likelihood. However, if applied to the wrong type of product, shoppers can be up to 50 percent less likely to purchase.

From a study in the Journal of Marketing, researchers from the University of Miami
found that free mystery gifts accompanying a purchase greatly increases the chances
of purchase, but only on items that trigger more emotion (called “affect”). On the other hand, if the product triggers less emotion and more cognition (called cognitive), e.g. a vacuum cleaner, this strategy may backfire because shoppers may perceive the gift will be a boring item.

If your products are in the right market for offering mystery freebies, you may even be able to get away with offering smaller gifts so long as the element of surprise is
maintained. The success of this method relies much more on uncertainty, fun, and
delight.

Result: Customers start generating free traffic for you.

Are you familiar with “word of mouth” marketing? With 92% of consumers more likely to trust recommendations from friends and family over advertising, word of mouth marketing becomes a must for businesses, regardless of size.

Realizing the power of customers saying nice things, companies like Procter & Gamble found the easiest method to get customers raving: free stuff. An article in the Journal of Marketing found that getting free stuff got people talking about it 20% more while those who received a freebie related to the product talked about it 15% more. Compare that to recipients of coupons and rebates, who showed no change.

If you’re interested in encouraging shout-outs for your freebies, it won’t hurt to ask.
Include a quick blurb in your packaging or emails with a snippet such as “We hope you love this gift! Let us know and tag us in your selfie!”

CTA Keeping up with Gen Z Marketing Your Store to the Next Generation

Topics: Tips and Tactics

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