The Team W Blog

Everyone loves free. There’s something truly magical about getting something that you value for free and the feeling seems universal.

In another post I’ll talk about why we feel indebted when we get something for free, but for now, I want to focus on the feeling of free. If we want it; we take it. It’s almost like a compulsion; a quick little burst of joy like the pure thought of a child. Here is a thing I wish to possess, and with no effort at all, I simply can possess it. Pure joy. Let me take you on a mind-journey to that feeling.

Imagine I walk up to your desk right now and place in front of you a delicate piece of your favorite candied dessert in the entire world, carefully wrapped in a small square of brown paper wrapper. It sits there perfectly. You reach down, pick it up, and eat it, savoring every second. Is it indulgent chocolate? Smooth and silky dairy crème? Lush strawberry? Fluffy sponge cake?

I encourage you to rate your feelings of joy on a scale of 1-10. Now clear your mind of that fun escape. Picture a paper clip on some sand. Okay, clear? Let’s go on another mind journey.

Imagine I walk up to your desk right now and place in front of you a delicate piece of your favorite candy in the entire world, carefully wrapped in a small square of brown paper wrapper. It sits there perfectly. I look at you and say: “Hi, I am selling this piece of candy. It’s small so I’m going to charge you $.01. If you’d like to purchase it, I only take cash. However, I see that you have a small stack of pennies on your desk so change should be no problem. Would you like to purchase it?”

Think about your decision. Would you pay a penny for the candy? How are you feeling? Are you feeling joy? Even if you did decide to purchase the candy and eat it, which would be amazing, I bet the feeling of pure joy about the transaction was lost or at least greatly diminished. If there was joy it felt different somehow. It was less pure joy and more the happiness and satisfaction of getting a good deal.

To us humans, free feels different somehow, and sure enough, it causes us to act differently too.

In Zero as a Special Price: The True Value of Free Products, a research paper by Shampanier, Mazar, and Ariely, the researchers explored different people’s reaction to encountering free with a series of clever experiments.

Subjects were given a choice between two pieces of chocolate. One was “cheap” (Hershey’s), the other was “expensive” (Lindt or Ferrero Rocher).  The experimenters played around with offering different prices to different people. Importantly, the expensive chocolate was always exactly more ($.25 more in the first experiment) than the cheap offering.

Here are the results:

The column on the left entitled “2 & 27” shows what happened when the researchers set the prices at $.02 for the Hershey’s bar and $.27 for the Ferrero Rocher. 45% chose the cheaper Hershey’s, 40% chose the more expensive Ferrero, and 15% chose nothing.

The column in the middle has the results for when the prices were $.01, and $.26. The results are about the same with a little bit of variance which is expected. The difference in price is still $.25 between the two candies.

The column on the right entitled “0 & 25” is the free condition (free and $.25). There is a huge shift when the price was free. 90% went with the free option and only 10% went for the Ferrero.

But there should be no difference between the different prices! You’re paying $.25 more for the expensive candy in any of the three conditions, and yet way more people choose the cheap candy when it is free vs. $.01. Somehow making it free makes it more valuable or desirable.

But what about transaction costs you might ask? Maybe people like free because the $.01 condition has a hidden cost; the cost of the transaction itself (aka, the pain and hassle of paying).

The researchers smartly accounted for this. They set up a real-world experiment where the chocolate choice was made at the checkout of a cafeteria. Everyone was already going to swipe their credit card. As you can see, there are similar results (although more people in the real world choose neither).

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The left column entitled “1 & 14” is the condition when both the Hershey’s and Lindt (this time) candies were not free ($.01 and $.14 respectively for a $.13 difference). Only 8% chose the cheap Hershey’s option, and 30% chose the expensive Lindt option.

The right column entitled “0 & 13” is the free condition. Again, the difference between the expensive and cheap candies is $.13. But once the cheap product is free there a huge increase in the percentage of people who choose the free candy over the more expensive candy.

In sum, in real world tests after accounting for transaction costs, the “value” of making something free is a +387% increase in sales of the free product (8% to 31% of marketshare), and a -230% decrease in sales of its competitor (30% to 13%).

So, let’s talk about some real-world implications. Do you need to destroy the subjective value of a competitor’s offering? Do you need to get a foothold in a market? Use free. And it may seem intuitive, but there’s a good reason why.

The leading theory (which is not yet proven, but makes sense) is that there is a brain science reason behind this. When you present a brain with a buy/not buy decision the brain lights up with activity. There are certain pathways in the brain that evaluate decision factors, determine preferences, and decide if you should make the purchase. Even at $.01 the neural pathways are activated in the same way as if you buy a more expensive item.

But at truly free, the brain uses an entirely different neural pathway. Instead of the “buy” neural pathway, it takes a deeper (mid-brain) pathway that involves feelings and emotions. These pathways determine if you want the item instead of if the item is valuable enough to justify a purchase.

Emotional pathways are processed more quickly. The quicker process feels like the right decision, and is easier to make, making you feel better about it.

Perhaps the “want/not want” pathways are emotionally stronger because the decision is being processed literally closer in the brain to where emotions are processed (mid-brain).

Or perhaps going through a value based buy decision drags up negative emotions because of the sadness of spending money.

Regardless of the reason, the theory is that because free is a different neurological pathway, it feels better and more valuable. Therefore, far more people choose the free item.

Thinking is hard and humans really hate doing it.

Have you seen this effect at work in your own projects? If not try it and see what happens. Again, make sure it is truly free otherwise your mileage may vary.

For example, having a price of 0, but requiring that users fill out their contact information isn’t really free. Other transactional “work” can dampen the effect. Give it a try!

 

Cite:

Shampanier, K., Mazar, N., & Ariely, D. (2007). Zero as a Special Price: The True Value of Free Products. Marketing Science, 26(6), 742-757. doi:10.1287/mksc.1060.0254