16 Dec The Psychology of Free
Are you currently offering no art charges, no setup fees, and free shipping and thinking that the public actually believes you? If so, you could actually lower your prices, build trust, and increase your sales and revenue.
Today, as I begin my research for this article, I wanted to find out how rampant this practice is in the screenprinting technologies. I performed a Google search for — “free setup” and “screen printing” — and received 27,200 results. “free artwork” and “screen printing” received 57,400 results, and “free shipping” and “screen printing” received 4,400,000 hits.
This led me to believe that it is much bigger than I had thought. Granted the searches included distributors of screen printing equipment and supplies. And, the search was worldwide, although more prevalent in the USA than in other countries.
It wasn’t always like this in America, and it’s not like this in most other countries. In Europe, people are leery of accepting something that is stated as free, and they believe it is probably an inferior product that the business is forced to offer services for free to entice buyers. The standard shipping and return policies in Europe would shock those in the U.S.A. In the U.S.A. buyers have become used to retailers who bend over backward to land a sale—an extreme of capitalism.
Free is a powerful word. It seems to promise something for nothing. Many believe that they only paid for 12 donuts, and smile as they leave the bakeshop with their “baker’s dozen.”
The word is so powerful that marketing books have been written about the concept of providing free services and products. According to Dan Ariely in his book ‘Predictably Irrational’, people change their behavioral patterns and are more willing to comply when something free comes along. Free isn’t just an indicator of price. It’s a very powerful emotional trigger that’s often so irresistible that it makes people stop at the end of the grocery store aisle to taste a tidbit of a product, provided by the grocer to entice people to buy the product.
For one, the free sample is something the customers perceive they did not pay for. They don’t have to reach in their pocket and pull out money to pay for it. The grocer is hoping for two things to happen; 1) the shopper will enjoy the free sample and 2) they will pick up a package of whatever it is that the grocer is selling. And, of course, right next to the free sample are hundreds of packages to buy at full price.
But, does it work? The answer depends on certain considerations. What is being sold and who the shopper is are two of the most important aspects of the free sample. Perhaps you have noticed, but the free samples are always low-cost, high-margin products for the grocer. You will never see a grocer giving away tidbits of expensive steak or imported caviar. Shoppers have grown accustomed to this fact and are accepting of the practice. If you are a price-conscious shopper you may notice that the price of the product used in the free sample was marked up during the two weeks of sampling. This is to cover the cost of preparing the product for sampling, the floor space required, and the salary of the individual dispensing the product. Previous marketing efforts have shown what the grocer will sell from the sample marketing and the markup will more than cover his cost of sampling.
But, there is another factor at play here. Who are these individuals who accept the sample and end up buying the product? Studies performed by behavioral and marketing specialists, such as Elliott Jaffa, have shown that the majority of people who base their purchases on free are those who are typically weak, uneducated, and in lower incomes. Finding and taking advantage of free products and services satisfy an inner urge to feel more powerful, special, and proud that they got something for nothing. Psychotherapist Judy Belmont states that when individuals believe they are getting the upper hand, they will take advantage of the free products and services.
Reverse-Psychology of Free
Many marketing specialists point to the dot-com boom as the moment when retailers, fed by investor dollars and under no pressure to turn a profit, started offering free services to get people to take a chance on companies they’d never heard of. Venture capital still drives much of the free-service expectation. The reason is that getting people to try something new can be difficult.
Many companies just starting out, especially those without business and marketing degrees believe it is necessary to keep their prices low to build clientele. However, they soon find out that without venture capital, they are own their own quickly realize that unless they cover all the cost and increase their prices, they are in a race to the bottom. Those that continue to advertise free products and services and attempt to absorb the cost into their price or lower their margins often find themselves in a chaotic situation of doing more work for less margin. By the time they make the decision to turn the business around, they have already burned the bridges to those clients who will pay higher prices and arrive with larger orders. Those buyers assumed that the products were not of the caliber that would meet their expectations.
Over time, the concept of the word free has slowly begun losing it’s meaning to an increasingly skeptical public. Today, even the bargain hunters that have bought on price alone, have started questioning the value and worth of a product or service when it is given to them free of cost. What could be wrong with the product? Why is it being given away? What are the terms and conditions applied? What is the catch behind the free product? The attitude of the buyer becomes suspicious towards the company itself.
Today’s consumer knows that nothing is really ever free. There is a cost to everything and if the business states that they are absorbing the cost of free art charges, free setup fees, and free shipping that the cost must be included in the price. And, those businesses that persist in offering free products and services in an attempt to trick the consumer into buying are met with criticism.
The days of free are on their way out in the U.S.A. and have been replaced by transparency and honesty from those businesses that want to increase their business. The smarter companies put more emphasis on meeting or exceeding the expectations of the buyers in their market. They realize the perceived value is in what the company can do for the client, what pains can be eliminated or resolved. WIII-FM has become everyone’s favorite radio station — What Is In It For Me!
The consumer does not want to hear about you, how long you have been in business, the size of the shop, the number of presses you have, or how great your employees are. They only care about what you can do for them. What pains can you remove from their list, can you deliver on time, and meet or exceed their expectations. And, last on the list—not first—is can you meet their expectations at a fair price.
If you feel that you have to give something to the customer using the principle of reciprocity, give them what they need rather than what they think they need. You have as many choices as you do customers. Get in the habit of asking every customer what they want from you as a business. The great majority will never mention free products or services as they do not hold any expectation that you are no more willing to work for free than they are. High on the list will be providing great customer service, which includes the following Top 10;
- Be accessible
- Be courteous
- Be responsive
- Be prompt
- Be socially responsible and ethical
- Tell me what to expect
- Meet your commitments
- Keep your promises
- Do it right the first time
- Follow up
Customer expectations are evolving rapidly, but customer service is always at the top of their expectations. Knowing your customers and anticipating their expectations is essential to developing effective customer contact services. Keep asking your customers what they want and listen to them. They will want to help you because they will get what they want. If you can meet all or most of the Top 10 above, you will find that your business will grow quickly and the chaos will quickly disappear.
This article originally appeared in Solution Journal Magazine.