Authors Michael A. Kamins (Stony Brook University-SUNY), Valerie S. Folkes (University of Southern California), and Alexander Fedorikhin (Indiana University) found that describing a bundled item as free decreases the amount consumers are willing to pay for each product when sold individually. They call this the "freebie devaluation" effect.
"Why does a freebie decrease the price consumers are willing to pay for each individual product? Our research shows that consumers tend to make inferences about why they are getting such a great deal that detract from perceptions of product quality," the authors explain. "For example, consumers figure the companies can't sell the product without this marketing gimmick."
The authors also found exceptions to the "freebie devaluation" rule. For example, when the researchers explained that the products were paired so consumers would become familiar with the freebies, they were willing to pay more.
The authors also discovered that consumers are willing to pay the same amount for a bundle describing one of the products as "free" as for a bundle without the "free" description. "Our research shows that consumers take a mental shortcut when it comes to thinking about the overall mixed bundle price—a shortcut that they do not resort to when thinking about the price of just one of the items in the bundle." The mental shortcut skips the skeptical thinking that leads to "freebie devaluation."
"Our research findings have important strategic implications for retailers and manufacturers, suggesting that giving away something for free in the context of a bundle may come at the cost for the sellers," the authors write. "Sellers' hopes for immediate gains from freebie bundle sales might be countered by reduced long-term profits."
Michael A. Kamins, Valerie S. Folkes, and Alexander Fedorikhin. "Promotional Bundles and Consumers' Price Judgments: When the Best Things in Life Aren't Free." Journal of Consumer Research: December 2009 (published online April 29, 2009).
Mary-Ann Twist | EurekAlert!
New study from the University of Halle: How climate change alters plant growth
12.01.2018 | Martin-Luther-Universität Halle-Wittenberg
Disarray in the brain
18.12.2017 | Universität zu Lübeck
What enables electrons to be transferred swiftly, for example during photosynthesis? An interdisciplinary team of researchers has worked out the details of how...
For the first time, scientists have precisely measured the effective electrical charge of a single molecule in solution. This fundamental insight of an SNSF Professor could also pave the way for future medical diagnostics.
Electrical charge is one of the key properties that allows molecules to interact. Life itself depends on this phenomenon: many biological processes involve...
At the JEC World Composite Show in Paris in March 2018, the Fraunhofer Institute for Laser Technology ILT will be focusing on the latest trends and innovations in laser machining of composites. Among other things, researchers at the booth shared with the Aachen Center for Integrative Lightweight Production (AZL) will demonstrate how lasers can be used for joining, structuring, cutting and drilling composite materials.
No other industry has attracted as much public attention to composite materials as the automotive industry, which along with the aerospace industry is a driver...
Scientists at Tokyo Institute of Technology (Tokyo Tech) and Tohoku University have developed high-quality GFO epitaxial films and systematically investigated their ferroelectric and ferromagnetic properties. They also demonstrated the room-temperature magnetocapacitance effects of these GFO thin films.
Multiferroic materials show magnetically driven ferroelectricity. They are attracting increasing attention because of their fascinating properties such as...
The oceans are the largest global heat reservoir. As a result of man-made global warming, the temperature in the global climate system increases; around 90% of...
08.01.2018 | Event News
11.12.2017 | Event News
08.12.2017 | Event News
16.01.2018 | Materials Sciences
16.01.2018 | Materials Sciences
16.01.2018 | Power and Electrical Engineering