We’ve touched on the power of reciprocity before when it comes to promotional products. The principle that we feel obligated to repay favors, gifts and giveaways. It’s nothing new, businesses like Kickstarter have built their whole business model around the theory of give and get something in return.
This is where marketing professionals believe they will make their money back. By providing someone with something useful at no cost to the consumer, the recipient, in return will begin to build trust with a company and begin to do future business with them.
But just one word that can turn that marketing pitch from a complete dud to a success.
The Power of FREE
The word FREE triggers a response from us that is different than any other transaction we have in the business world. As marketers, FREE draws a users eyes to where we want them to go on a specific page and entices users to move forward. Why? Because our brains are hardwired to love the feeling of getting something for nothing.
Understanding the psychology behind the word can help demonstrate why giveaways can have a positive impact on a business.
A free product comes with:
- Low Expectations (hey, its free)
- Neutral Preceptions (what’s the worst that could happen)
- Positive Impressions (if the product proves to be useful, a neutral preception can become a positive impression for a business)
The same can hold true online for things like free eBooks, trails, services, web tools, guides and other online content.
How FREE Brings in More Business
Businesses are sometimes hesitant to give away something for nothing because to give something away for free to a consumer is going to cost a business money. And that’s going to take away from their bottom line. Yet, its been proven time and time again, that advertising a popular freebie can actually result in a rise in sales.
For example, take 7-Eleven’s Slurpee giveaway. On July 11 (7/11), the unofficial birthday of the Slurpee, the convenience store chain gave away roughly 4.5 million mini-sized Slurpees, no questions asked. Customers didn’t need a coupon or forced to buy something else in return to get their hands on as many free mini Slurpees as their brains could handle.
Sweet, happy birthday to me! Nope. It was actually 7-Eleven who profited from this giveaway. Slurpee sales actually skyrocketed by 38% on that day.
Why? The brand director of 7-Eleven, Laura Gordon, says its because once you take the taste of one, you have to have more.
But no one wants to sit in the store and continue to refill their small cup until they’ve had their fill of sugary goodness. And a giveaway like free Slurpees attracts the masses. People go for the free Slurpee, but also fill up on gas, maybe pick up a gallon of milk and refill on whatever dirty habit they may be running low on. A win-win situation.
The Penny Gap
The psychology behind the penny gap illustrates that a consumer will find the barrier between a penny and free greater than the same value of a product they may deem more valuable and less of a commodity.
In an experiment from Chris Anderson’s book, Free: The Future of a Radical Price, a chocolate kiss and a chocolate truffle were offered. In the experiment the kiss was offered for a penny and the truffle for 18 cents. The majority of consumers choose the truffle over the kiss. However, when the price of the truffle was changed to a penny and the kiss became free, the opposite happened.
The reason why consumers valued the truffle more, even when the kiss was only a penny, was because chocolate kisses are widely available while chocolate truffles are not; the price for the truffle was deemed a better value. It wasn’t until the chocolate kiss became free that consumers found the real value.
When you ask a company what their customers are worth many businesses will answer, a lot. Yet, how much are you paying to reach them? The answer may be surprising (hint: its most likely quite a bit). This is why the free model is becoming pervasive; it is actually changing the way companies acquire customers.
A giveaway can have the same effect for a company, when a company does a giveaway like 100 free personalized pens by subscribing to their newsletter, the user sees the subscription as gold because they know they will be receiving free product in return. The expense of the free pens is what the company will have to forfeit, but in return what the company gains is new subscribers who will be mailed the newsletter regularly, which in turn can be flipped from new potential consumers to real ones.
Giving away a product for free can be a scary thing, but understanding the penny gap and weighing the cost of acquiring customers can make free look pretty good.