Reading about the free coffee, ice cream, doughnuts and other goodies that some companies are giving away on this election day, I was reminded of the “lure of free” discussed in Dan Ariely’s book “Predictably Irrational”.
Prof. Ariely describes some experiments where a leading brand and an average brand of chocolate are given either at a big discount or “free.” The “lure of free” is so powerful that it overrides rational thinking.
For example, if the “good” chocolate was normally priced at 50 cents and the “average” one at 30 cents, dropping the prices to 40 cents and 20 cents respectively does not tip the sales in favor of one or the other, compared to selling them are their normal prices. But if the prices were dropped to 10 cents (discount of 40 cents) and 0 cents (discount of 30 cents) respectively, an overwhelming majority choose the “free” “average” chocolate at a discount of 30 cents, rather than the “good” chocolate at a discount of 40 cents.
As soon as the lure of free sets in, the value of real discount from the normal price becomes almost irrelevant.
So today’s free offer of Starbucks coffee, Krispy Kreme doughnuts, and Ben and Jerry’s ice-cream is sure to lure swarms of people from their homes and offices to drive up to the nearest store and wait in lines to get their share of “free.” At some point, the lines and the wait are probably going to get long enough to overcome the lure of free and send some people back, so it may be self-limiting in some ways. That’s probably what these companies are banking on.
Nonetheless, it is a lot of good publicity for them, and a great way to get some new customers hooked.
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