July 21, 2022

The Free Gift Balancing Act

hands holding piece of paper with the word FREE

Commerce Trends

We all love it when we can get something for free, and marketers have capitalized on that fact by offering free promotions, free samples, free shipping…and the list goes on.

Dan Ariely, a professor of behavioral economics at Duke University who has extensively researched the appeal of free things, co-authored a study called Zero as a Special Price: The True Value of Free Products. Through a series of experiments, they discovered that “people overvalue things that are free, and make irrational decisions in many cases when something free is involved.”

People are drawn to things that are free, regardless of need or quality. A 2019 Walker Sands Future of Retail Survey found free shipping was far more likely to result in an online purchase—more than free returns or same-day shipping. It’s possible that subscriptions or higher-priced products are better than the free item, and yet we’re much more likely to choose the free item. Because people love free things, one consequence is consumers are hesitant if not sometimes unwilling to pay for content on the Internet, such as subscriptions or memberships.

Why This Matters

Many non-profits utilize the appeal of free products as part of their marketing and acquisition strategy. And yet it can be challenging to balance giving things away while also modelling financial responsible to your donors. It’s also worth considering what you choose to give away, knowing how the word “free” can cause people to act impulsively. Free gifts can be an important tool in fundraising, sales, and ministry activities. However, these strategies should be applied with wisdom.

Next Step

Click here to review more analysis and data on why free things make us irrational.