Why ‘Free’ is our favourite F-word

We all like free stuff. If you don’t, you’re lying to yourself. 

From a free sample in the supermarket to a special Buy-1-Free-1 offer on Amazon, there is no doubt that the word ‘free’ catches our attention (especially if it’s in ALL-CAPS), and most of the time, a free shipping offer may be the final push we need to click the ‘Buy’ button.

Relatable. Taken from Reddit

When Amazon introduced free shipping in some European countries, the number of orders increased drastically everywhere… except in France. The reason? In France, instead of reducing the shipping price to zero, it was reduced to EUR0.01. This small difference had a huge impact on sales.

So why do we like free shipping so much? To answer this, we first need to understand why the word ‘free’ is so attractive to us. When faced with different buying alternatives, we tend to gravitate towards the free option, regardless of its intrinsic value.

Imagine you were offered to choose between a 1 cent Hershey’s Kiss or a 15 cent Lindt truffle. According to research, people would choose the Lindt truffle as it is usually considered a superior chocolate.[1]

Taken from CXL

Now imagine the Lindt truffle was 14 cents and the Hershey’s Kiss chocolate was free. Which one would you take from the table?

Taken from CXL

Our choices change drastically when presented with an option with zero cost. This mini-experiment had only 27% of people picking the Hershey’s Kiss in the first scenario. The second scenario, on the other hand, saw 70% of the people going for a Kiss.

The true value of ‘FREE’

When we are faced with a choice between two products, one of which being free, we overreact to the free product as if zero pricing not only decreases its cost but also increases its benefits.[2] So, a reduction in price from $1 to zero is more powerful than a reduction from $2 to $1.

To put it simply, most choices or transactions in life have an upside and a downside. But when something is FREE! we ignore the downside and we perceive what is being offered as immensely more valuable than it really is. How can we explain this behaviour? Why is “free” so irresistible?

Emotions and mental shortcuts

We make many decisions each day, some more complex than others. We like to think that we are rational beings that will analyze the context, costs, and benefits in order to ultimately choose the better course of action. However, more often than not, we are proven wrong and we see that our decision-making is more irrational and influenced by emotions than we would have thought. 

Although analysing information is important in many decision-making circumstances, emotion-based evaluations are quick and automatic. These evaluations are activated prior to our reflective and rational judgments. Processing and evaluating information takes time and energy, so our mind uses cognitive shortcuts called heuristics, that simplify the process.[3,4]This approach is especially pronounced under conditions of uncertainty or in cases where we do not have the resources or time to analyse large amounts of information. [3,4,5]

How heuristics help us. Taken from VeryWell Mind

The affect heuristic is one of the main psychological explanations for this effect because options that have no downside (no cost) trigger a more positive response. According to this heuristic, people make decisions based on the positive or negative feelings associated with the perceived benefits and risks of the decision.[5]

People also sometimes struggle with measuring the utility they expect to receive from purchasing an item and have a hard time translating its value to money. This uncertainty disappears when there’s a free option; there is no downside, and therefore, nothing to lose! 

Loss-aversion and framing effects

Humans don’t like losing. To be more precise, we feel the pain of loss twice as much compared to the pleasure of gaining. Because of this, we are more willing to avoid losses than to pursue gains.[6]

Taken from OmegaZAdvisors

When we choose the free option there is “no risk” of losing money, and we minimize the possibility of regret, even if it is not the optimal choice. We weigh potential costs and failures more heavily than potential benefits and rewards, and so we would rather accept a small but certain reward over a mere chance at a larger gain.

That is why the way things are presented to us also plays a key role. It can draw attention to the positive gain or negative loss associated with an option. Since we tend to avoid loss, how information is framed can have an important impact in our decision-making process. This is called the framing effect.

So why do we like free shipping so much?

When we see shipping costs, we see two separate amounts of money. Although the math is simple, there is an additional conflict in place. Take the image below as an example. All three options may total to the same amount, but how the information is framed can make all the difference in how we perceive it.

How the pricing is framed makes all the difference! Taken from John J Sills

Framing and the affect heuristic also explain why the word ‘free’ is more powerful than a discount. Fractions and percentages require our brains to process something logically, which people don’t enjoy doing while shopping. Ultimately, getting something for ‘free’ is largely emotional.

Takeaway

Long story short, we like free stuff to the point where we stop behaving like rational consumers. When faced with various options and a free one, we get distracted from making a real evaluation of what we want and the associated cost-benefit ratio. 

We are all influenced by emotions when making decisions and our brains use heuristics to navigate an uncertain world, but after reading this you might take an extra second to think about your options the next time you see the word FREE.


Academic References

  1. Ariely, D. (2010). Predictably irrational. New York: Harper Perennial.
  2. Shampanier, K., Mazar, N., & Ariely, D. (2007). Zero as a Special Price: The True Value of Free Products. Marketing Science, 26(6), 742-757.
  3. Skagerlund, K., Forsblad, M., Slovic, P., & Västfjäll, D. (2020). The Affect Heuristic and Risk Perception – Stability Across Elicitation Methods and Individual Cognitive Abilities. Frontiers In Psychology, 11.
  4. Slovic, P., Finucane, M., Peters, E., & MacGregor, D. (2007). The affect heuristic. European Journal Of Operational Research, 177(3), 1333-1352.
  5. Finucane, M., Alhakami, A., Slovic, P., & Johnson, S. (2000). The Aect Heuristic in Judgments of Risks and Bene®ts. Journal Of Behavioral Decision Making, 13(1).
  6. Kahneman, D., & Tversky, A. (1979). Prospect theory: An analysis of decision under rsiisk. Econometrica47(2), 263-292.

Leave a Comment

Your email address will not be published. Required fields are marked *