What about the F-Word?

Everywhere we turn, you get bombarded with free. A free t-shirt with this, free extras with that.  Buy one of this get one of that free. Disintermediation on the internet has made things that are intrinsically valuable, free too.

(This is an extract from our monthly newsletter. To subscribe, register here.)

>> Where will it end?

>> Will we ever become de-sensitised to free?

>> Does 'free' work on other people - but not on us?

The fact of the matter is this: Human beings are not rational decision makers.

Consider just one piece of research:

Passersby are offered a choice between two chocolates:
Chocolate A is an expensive Swiss chocolate offered at 15c per piece (one bite-sized block.)
Chocolate B is the common, everyday chocolate offered at 1c per piece.

What do you think happened?

Customers chose rationally:

  • Chocolate A - 73%

  • Chocolate B - 27%


Then the researchers dropped both prices by 1c. On a rational level the value equation remained exactly the same. Chocolate A was priced at 14c and Chocolate B was offered at 0c (i.e. free).

People's choices changed dramatically.

  • Chocolate A - 31%

  • Chocolate B - 69%


Almost the exact opposite. The researchers experimented with a variety of price points, always with the same result.

The reason for this is that every decision has an upside and a downside (taste, pleasure, satisfaction, prices, getting fat and so forth.) Customers will make a decision by weighing up these criteria. (The basis of their evaluation is not necessarily rational, but they make a decision nevertheless.) When you introduce one option as 'free' - they ignore the downside of the decision altogether.

The problem of course is that you cannot make money out of free, right?

Wrong!

Have you never been swayed to buy something if just part of it was free?

  • A TV because there was a free Foxtel subscription?

  • A car because of the free on-road costs?

  • The first 3 months free?

  • Free home delivery?

  • A free entry into a competition where the odds are a million to 1 of you winning something?


Free is a powerful force. It induces reciprocity - which is a powerful human motivator. I have actually seen people run away from people who want to give them something for free because they know how powerful the urge to reciprocate is, and they wanted to avoid it.

Competing with FREE is a strategic imperative. In fact, it is the basis of the most important strategic question you can ask yourself right now. (Click on link to read more.)
To promote your business, you need to understand the relationship between that which is free (and expected to be free) and what the real value of your offer is.

Over the Christmas/New Year break these maybe the thoughts that should occupy your mind because the answer may just be the difference between success and failure.

  • Can you really compete with free?

  • What would you REALLY do if your core product was available free tomorrow?

  • How can you use free to make more money?