Remember when Blu-ray and HD DVD were competing for head to head and it became clear that Blu-ray was going to emerge as the standard? Savvy retailers, knowing that buyers respond in irrational ways to the word “Free”, began to offer HD DVD players that sold in the neighborhood of $400 a piece with “Five Free DVDs with the purchase of an HD DVD player”.
A rationally thinking person would say, what good is a $400 DVD player if I can’t purchase DVDs to play in it? However, the irrational attraction to FREE caused consumers to clear the retailers’ existing inventory of the soon to become obsolete HD DVD players, which allowed retailers to focus on the emerging standard Blu-ray devices.
Amazon recognized the power of FREE to tap into the irrational part of the consumer’s brain when they began offering “Free Shipping” on items over twenty-five dollars. Now consumers often bought two or more items, though they likely only wanted one item when they initially visited the site, just to take advantage of the free shipping.
The word “Free” appeared in more than three-quarters of a trillion (not million or billion) google searches in the past month alone. Consider, “Free oil changes for life” if you buy a new car, “Free checking” if you open a new account, or “Free WiFi” if you stay here. These are just a few examples of how smart marketers have used “Free” to drive consumers into decisions that pure reasoning would cause them to ignore.
Knowing that buyers react irrationally to getting something for free, what pricing model involving something for free can you use in your business to improve sales?
