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
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¢).
Those in the zero-priced truffle group felt disproportionately more attracted to their truffle than those in all other truffle groups.
Shampanier, Mazar & Ariely (2007). Zero as a special price: The true value of free products. Marketing Science, 26, 742-757.
Key Takeaways
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.
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.
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.
In further detail
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
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¢).
Those in the zero-priced truffle group felt disproportionately more attracted to their truffle than those in all other truffle groups.
Shampanier, Mazar & Ariely (2007). Zero as a special price: The true value of free products. Marketing Science, 26, 742-757.
Key Takeaways
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.
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.
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.
In further detail
We value something more when free over very cheap
The study
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¢).
Those in the zero-priced truffle group felt disproportionately more attracted to their truffle than those in all other truffle groups.
In detail
Scarcity
We value things more when they’re in limited supply
Social Proof
We copy the behaviors of others, especially in unfamiliar situations
Prospect Theory
A loss hurts more than an equal gain feels good
Reciprocity
We’re hardwired to return kindness received
Framing
We make very different decisions based on how a fact is presented
Loss Aversion
We feel more negative when losing something than positive when we gain it
Self-Expression
We constantly seek out ways to communicate our identity to others
Default Effect
We tend to accept the option pre-chosen for us
Anchoring
What we see first affects our judgement of everything thereafter
Autonomy Bias
We have a deep-seated need to control our situations
Fast & Slow Thinking
We make knee-jerk spontaneous decisions that can cause regretful damage
Status Quo Bias
We tend to stick with our previous choices, even if the alternatives might be better
Dynamic Norms
We’re more likely to change if we can see a new behavior developing
Salience
Our choices are determined by the information we're shown