Free things tend to have higher value due to risk elimination
Description
When customers pay for something, they calculate the risks of any dissatisfaction they might get from that product.
They have no expectations of free products and can even value them higher, compared to more expensive goods.
Research:
An experiment from 2007 showed the zero-effect on customer choices. Participants were divided into two groups: one would have to choose between a bar of chocolate that cost 1c and a 14c truffle. The other group decided between the same products but the low-quality one was offered free and the truffle was for 13c.
The first group chose a higher-quality product over the cheap one. The second group chose free, low-quality product over the higher-quality truffle.
Application
Free Trials or Samples
Offering free trials or samples of digital products or services can be an effective way to attract new customers. For instance, software companies often provide a free trial period for their products, allowing users to experience the full version temporarily without any cost. This strategy not only attracts users who are hesitant to pay for a product without trying it first but also creates a sense of value and quality associated with the product. Once the trial period is over, users who have become accustomed to the product may be more likely to purchase the full version.
Freemium Business Models
Many digital services, such as mobile apps or online platforms, use a freemium business model where the basic service is offered for free, but advanced features or additional services require payment. This model exploits the Zero Price Effect by first attracting users with a no-cost offer and then monetizing through upselling premium features. The key here is to provide enough value in the free version to engage users, while keeping the most desirable features behind a paywall to encourage upgrades.
Free Gifts with Purchase or Subscription
Digital marketers can also apply the Zero Price Effect by offering free gifts or bonuses with a purchase or subscription. For example, a digital magazine subscription might come with a free e-book or exclusive content, or a cloud storage service might offer additional space for free with a yearly subscription. This approach not only adds perceived value to the primary offering but also can tip the scales for consumers who are on the fence about making a purchase.
Examples
