The cost of free
Free is an attractive word; it gets attention. But it can also be a dangerous word; one that should probably be avoided much more often than it is.
Researchers led by Michael A. Kamins (Stony Brook University-SUNY), recently published an academic article on the effects of bundling products together and calling one of them free. (You can access a press release or purchase the article here.) The basic findings: consumers devalue anything that is labeled free. They found that if you bundled two products together without using the word "free," then any devaluation is significantly less.
Something to think about as associations bundle products and services together as a revenue-generating tactic in a tough a economy.
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Comments
It's a great point but we also need to be very careful not to over-extrapolate and conclude that discounting is also a source of devaluation: I say this because everytime the concept comes up in idea swaps and the like one will hear membership directors and other staff say "I'm very opposed to discounts because you devalue something when you make it free." The rationale is true, based on this & other research, but "free" is only a subset of discounts (i.e., cases when we choose to offer something at 100% off).
Discounts work well in most offers to attract prospective members, attendees, purchasers who are in the feasible market but don't often purchase because we're somewhere above their reservation price. Another interesting practice comes to bear when we find that services don't sell very well on a fee basis, and so we respond by rolling them into the bundle of services included in membership. This is like making something free, so arguably it devalues the service ... but it would be interesting to know if it hurts perceived value with those who were willing to purchase it a la carte, or if it primarily degrades perceived value among those who were previously unwilling to pay list price for the service anyway...
Posted by: Kevin Whorton | June 24, 2009 11:03 AM