New research has found that a free promotion is more beneficial for a marketer than offering discounts
Consumers value a free gift more than a strongly discounted item, according to research published recently in the Journal of Consumer Research. The authors of the report found that “pairing a free product with a high end one may very well increase perceptions of its value”.
Mauricio Palmeira, senior lecturer of marketing at Monash University, Melbourne, Australia and Joydeep Srivastava, Ralph J Tyser Professor of Marketing and Consumer Psychology at the Robert H Smith School of Business, University of Maryland, wanted to investigate the premise that people do not value things they do not pay for, and to look again at conflicting results found in previous surveys.
They found that, among the 750 subjects questioned in separate studies and across a range of price promotion contexts, “the price consumers are willing to pay for a product after the promotion is retracted is higher when it is offered for free than when it is offered at a low, discounted price”.
“In other words,” concluded Palmeira. “In terms of product valuation and price expectations, a free promotion is more beneficial for a marketer than offering a product at a discounted price in the long term.” The reason may be that the free product takes on the perceived value of the product with which it is teamed, thus resulting in it its being valued more highly by the customer.