When Will You Use This?
Consider you are deciding whether to offer a specific product for free or for a discounted price of only £10 to customers who purchase a special package for £100. What's better?
The following research will be useful while creating promotional offers for your customers.
What’s The Red-Letter Bite Today?
While promoting their products many brands offer a product for free or for a discounted price (let’s call it a supplementary product) along with a required purchase (let’s call it a focal product). How does it affect customer’s willingness to pay for the product? Is it true that a free offer might devalue the product?
The current series of experiments* examine the effect of a promotional price of a product on consumers’ judgment of product’s value (once the promotion is retracted). It is demonstrated that consumers are more willing to pay for the product after the promotion when it was offered for free than when it was offered at a discounted price.
This research also provides evidence that, contrary to a popular belief, a free offer does not devalue the product at all.
Moreover, it is important to note that “while the price of the supplementary product itself serves as a natural anchor when it is offered for a low price, the price of the focal product or purchase serves as a price anchor when the supplementary product is offered for free.”
Addition To Your Bag of Tricks
While creating promotions to boost your short-term sales, you should have in mind that:
• promotions with low, discounted prices devalue products more than free offers.
• free offers may not devalue products as consumers use the price of the focal product to estimate value of the supplementary product.
• promotions with low, discounted prices devalue products more than free offers.
• free offers may not devalue products as consumers use the price of the focal product to estimate value of the supplementary product.
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