The word ‘free’ illicits a response in our minds that’s completely different from any normal business transaction.
This emotional (and sometimes unfounded) reaction to the concept of free is perpetuated in the book Predictably Irrational by professor of Psychology and Behavioral Economics, Dan Ariely.
While talking about the impact of the concept of ‘free’, Ariely says, “ ….in the land of pricing, zero is not just another price. Because nothing beats the emotional surge of FREE! This, the zero price effect, is in a category all its own.”
Chris Anderson, author of The Long Tail, and ex-CEO of WIRED wrote in his book Free – The Future of a Radical Price this. “Charging a price — any price creates a mental barrier that most people won’t bother crossing”.
How to Capitalize on ‘Free’
If you’re running any type of business, from software to food to retail, mental transaction cost is a problem you’re dealing with on a daily basis. One effective solution to address this issue is using a giveaway.
Giveaways thwart mental transaction costs by taking the ‘cost’ out of the formula. When you use a giveaway, you get current and prospective customers envisioning themselves using your product.
The ‘free’ business tactic actually works for large companies too. The convenience store chain 7- eleven gives away unlimited free slurpees on July 11th every year (Get it? July 11th = 7/11. Funny, right?). There’s no coupon needed, no restrictions, no catch. You’d expect them to lose a lot of money, right? Well actually they make boatloads of money through doing this.
The retail giant Costco is infamous for the large quantities of free samples they give away. An article by The Atlantic highlighted that when free samples of pizza are provided, Costco sales of pizza go up by 600%, when wine is sampled, sales go up by over 300%.
What Does This Mean For You?
Well, obviously, the psychology of free has a place in every business’s marketing strategy. Giveaways are powerful—powerful as a marketing tactic and powerful as a tool to elicit an emotional response to your business. Giveaways encourage a casual website visitor or new social traffic to imagine themselves as one of your customers without having to take out their card. Giveaways allow you to break down the walls of the mental transaction cost to spread awareness of your offer and capture new social followers, email list subscribers, and business advocates.
So Use Free In Your Marketing
Devise a free giveaway that will give valuable information to your prospective customers/clients. And exchange it for their email. You can then market your offer to them via email.