Zero Price BiasOpen Access

Zero Price Bias

We value something more when free over very cheap

A product’s price acts as a signal of its value. But without a reference point, we have to make our own conclusions, driven higher by emotion.

Shampanier, Mazar & Ariely (2007). Zero as a special price: The true value of free products. Marketing Science, 26, 742-757.

The study

Setup

Setup

243 people were split into four groups and asked about the attractiveness of one of two types of chocolate truffle at one of two prices (Hersheys at 0¢ or 1¢ or Lindt at 13¢ or 14¢).

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Results

Results

Those in the zero-priced truffle group felt disproportionately more attracted to their truffle than those in all other truffle groups.

Study graph
np_read_2490885_000000

Shampanier, Mazar & Ariely (2007). Zero as a special price: The true value of free products. Marketing Science, 26, 742-757.

Key Takeaways

1
1

Replace very low cost with free.

Amazon famously rolled out free shipping in Europe, sales rose everywhere but France, where shipping was mistakenly set at 10¢. What small costs are you passing on to consumers?

In line with Prospect Theory, it may be better to bundle ‘the pain’ within a larger cost.

Takeaway image
2
2

Communicate what is free.

Consider surfacing bundled, previously hidden value that you offer, actively highlighting the zero cost in marketing material and on invoices etc.

Takeaway image
3
3

Nudge with small charges.

The flip side of zero-pricing is that incurring even a small cost quietly impacts our decisions. If you're trying to change behaviour, imposing a small discomfort can disproportionately assist.

Takeaway image
4
4
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Pairings

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Zero Price Bias

Zero Price Bias

We value something more when free over very cheap

A product’s price acts as a signal of its value. But without a reference point, we have to make our own conclusions, driven higher by emotion.

The study

Setup

243 people were split into four groups and asked about the attractiveness of one of two types of chocolate truffle at one of two prices (Hersheys at 0¢ or 1¢ or Lindt at 13¢ or 14¢).

Results

Those in the zero-priced truffle group felt disproportionately more attracted to their truffle than those in all other truffle groups.

study graph
np_read_2490885_000000

In detail

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We value things more when they’re in limited supply

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We copy the behaviors of others, especially in unfamiliar situations

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A loss hurts more than an equal gain feels good

Reciprocity

Reciprocity

We’re hardwired to return kindness received

Framing

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We make very different decisions based on how a fact is presented

Loss Aversion

Loss Aversion

We feel more negative when losing something than positive when we gain it

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We tend to accept the option pre-chosen for us

Anchoring

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What we see first affects our judgement of everything thereafter

Fast & Slow Thinking

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We make knee-jerk spontaneous decisions that can cause regretful damage

Dynamic Norms

Dynamic Norms

We’re more likely to change if we can see a new behavior developing

Salience

Salience

Our choices are determined by the information we're shown

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Certainty Effect
We crave clarity over chance and make costly sacrifices to get it

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Certainty Effect
We crave clarity over chance and make costly sacrifices to get it
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