What is it?
A price of zero is much more attractive than any other price, no matter how low. The mere sight of the word ‘free’, releases large quantities of dopamine in our brains, makes us feel happy, thus resulting in a tendency to respond irrationally.
How can I use it in my favour ?
A group of researchers offered participants of a study a choice between purchasing a Hershey HSY -0.31%’s Kisses chocolate for 1-cent ($0.01) or Lindt Lindor chocolate truffle for 15 cents ($0.15). The participants, recognizing this as a good deal since the price differential in a supermarket would be larger than 14 cents between the two options, overwhelmingly chose the latter. However, when the price of both was reduced by 1 cent, thus making Kisses free and the Lindt Lindor for $0.14, the preference completely reversed with an overwhelming majority choosing Kisses! Nothing had changed–consumers would still get the same amount of incremental joy (consuming an exotic truffle vs. a regular candy) to the same amount of incremental pain (spending $0.14 more). The preference should not have changed but our response to price reduction becomes very non-linear when the price reaches “free”.
Offering something for free is one of the most commonly used tactics – whether the offer is for a free sample of a product, or a free trial of a service.
The ‘Buy one, get one half price’ may seem like an enticing offer, but studies have shown that ‘Buy one, get one free’ offers consistently outperform the lower priced ones.