As the holiday season approaches, retailers are finalizing plans for their “most wonderful time of the year” with sales and special offers to draw in customers and boost sales. These will typically involve deep discounts but a recent study indicates that when designing offers, free gifts may carry more sway with customers especially if they come from a prestigious brand. According to the studyÂ byÂ Mauricio M. Palmeira and Joydeep Srivastava in theÂ Journal of Consumer ResearchÂ ,Â consumers believe the value of a free product paired with a purchased product is likely to be consistent with the value of that Â product. So pairing a free product with a high-end product may very well increase the overall perceived value of the entire offer.
Free with the Purchase of…
High-end cosmetics companies like LancÃ´me and Clinique have used this technique effectively for years offering free gifts with the purchase of a full-priced product. The study however, indicates that the marketing technique translates to other products as well. In one example, study participants were offered a free or discounted package of spaghetti with the purchase of a jar of organic tomato sauce for $8.95. They were then asked how much they would pay for the spaghetti individually. People offered free spaghetti were willing to pay an average of $2.95 for it, but those offered the spaghetti for $.50 were only willing to pay an average of $1.83. The perceived value is greater, therefore making the deal more attractive.Â When a free product is paired with an expensive product, consumers assume it is worth more than if it was offered at a low discounted price. “Promotions with low discounted prices devalue products more than free offers. In fact, free offers may not devalue products at all when they are paired with an expensive purchase, as consumers will use the price of the focal product to estimate the value of the supplementary product,” the authors conclude. “If Mercedes-Benz promotes a car with a free GPS system, we expect the GPS to be high quality,” the authors explain.
Building Your Promotion
So what does this mean for businesses who are working to develop marketing deals? If your marketing is based on a campaign (which it should be), look for products that can compliment the underpinnings of that campaign. What products do you carry or have access to that will appeal to your target audience? Is there a co-branding opportunity for you to design an offer with a product from another business? Adding a free product to your offer will boost the perceived value and bolster the entire deal to motivate potential buyers. This is particularly important for marketing efforts during the holiday shopping season.
In a competitive landscape of cut-rate deals, anything that can influence consumers in a positive way will give you an edge and help you generate more sales.Â A well crafted deal with a free component has been shown to do this and can provide that little extra that will differentiate you in an already crowded marketplace.
Make me a deal.