We’ve all seen “Buy One, Get One Free” advertisements. It’s the single simple word “free” that allures us as consumers to buy a certain item or shop at a particular store. Be clear that these sales tactics are not due to the charitable nature of corporations but because they are great marketing and sales techniques to get you to part with your money. So, are they legit? Let’s have a look.
The Psychology of Free
In the book Predictably Irrational by Dan Ariely, there is evidence that people will change their behavior and choices when the word “free” is inserted in an ad or in a decision-making process. It is more of an emotional response than an indication of price.
An interesting study involving chocolate was done to prove this point. In the first scenario, people were offered the choice to either buy a Lindt Truffle for 15 cents each or a Hershey Kiss for 1 cent each. 73% chose the Lindt Truffle. Now in the second scenario, the price of each chocolate was dropped by 1 penny. So, the Lindt sold for 14 cents and the Hershey for free. 69% of respondents chose the Hershey Kiss. They could not escape the emotional trigger of receiving a free item despite the Kiss only being one penny in the first scenario and most people turn their nose to it in favor of the more luxurious Lindt Truffle. When the word free is introduced into a decision-making process, it not only decreases the price, but it makes us believe that the benefits of the free item are greater.
The Zero Price Effect
So why the irrational behavior? It can be attributed to the Zero Price Effect. When you pay for something there is a certain amount of risk associated with it because you may not like what you purchased or get no value out of it. However, if the item is free it mitigates the risk of loss since in your mind it really didn’t cost you anything. Would you pay $7 for a day old hot dog at the ballpark? Would you trample the people in the row in front of you if that same hot dog were launched from an air cannon during the 7th inning stretch? The moment free is introduced we get overly excited and stop thinking rationally, Ariely argues.
Corporations know this and will often offer buy one get one free deals, or offer free shipping on items if you spend X. Amazon has mastered this with its Prime Membership. Other retailers engage in these marketing tactics all the time as well.
Buy One Get One Free — BOGO
Buy one get one or BOGO is a favorite marketing strategy of retailers everywhere. 80% of “free” promotions are BOGO style promotions, and 93% of consumers say that they have taken advantage of a BOGO sale. Retailers love it because it allows them to offload inventory surpluses at a handsome profit.
Shoppers like these sales because there is a perception that they are getting an item totally free of charge. But, according to the industry, most of the items offered on BOGO sales are low demand, low in quality, close to expiration, and often marked up to compensate for giving one away for “free.”
The BOGO is a tactic that relies on the consumer not paying much attention to the details of the sale. Consumers see “free” and assume that they are getting a good deal without actually stopping to do the math. What you are getting is 50% off the MSRP, and that price is artificially inflated to begin with.
Shady Deals
Consumer Reports says that they have over 150 examples of a shady BOGO offer and subsequent lawsuits that resulted from them. A common tactic is to simply inflate the price of the first item when the sale starts. You are now getting two items on a BOGO sale for about what two would have cost anyway had they not been on sale. You have saved nothing, and the retailer just sold you two of something that you probably didn’t need.
A lot of what consumers buy on BOGO will end up in the trash can. Why? Because a lot of BOGO sale items are perishable and close to expiration. We can’t resist two cartons of milk for the price of one, but the second carton will most likely go bad before we ever get around to drinking it.
Too Good to be True
If a deal seems too good to be true, then it probably is. If you are encountered with a free offer, whether it be free shipping or a BOGO offer, make sure to stop and think before proceeding. Is it worth spending an extra $50 to get free shipping on an item? Do you really need two of an item when you only need or can reasonably use one? Does the item that you are getting “free” have any real value? By all means, you should seek out and take advantage of sales and markdowns. Just be sure to not get caught up in the irrationality of “free.”
Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.
