Power of Free: The True Psychology Behind the Zero Price Effect

Nov 22, 2022 · At these prices, 8% of people chose Hershey, and 30% chose Lindt. However, when both products were reduced by one cent so that Lindt cost 13 cents and Hershey was free, the demand for Hershey almost quadrupled to 31%. This irrational preference for free things is …

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Power Of Free: The True Psychology Behind The Zero Price Effect

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Zero Price Effect - Behavioralscience.org

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Free goods have extra pulling power, as a reduction in price from $1 to zero is more powerful than a reduction from $2 to $1. This is particularly true for hedonic products—things that give us …

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FAQs about Power of Free: The True Psychology Behind the Zero Price Effect Coupon?

Is there a psychological mechanism for the zero price effect?

A possible psychological reason for the zero price effect is the norms that might accompany free products. According to Fiske (1992), McGraw, Tetlock, and Kristel (2003), and McGraw and Tetlock (2005), costly options invoke market exchange norms, whereas free products invoke norms of social exchange. ...

How does the zero price model work for a product?

In the zero price model, as the prices fall from the cost condition to the free condition, the costs decrease for both products, but the benefit for the now free product increases more. This results in the net benefit of the cheaper product becoming higher. The demand prediction for the zero price model is that... ...

What happens when the price of zero is particularly attractive?

According to the model, when the price of a product is reduced from a cost condition to a free condition, the attractiveness of the free product increases, leading to an increase in its relative demand. ...

How can you take advantage of the zero price effect?

Besides free shipping, there are other strategies that can be implemented to take advantage of the Zero Price Effect. Free samples: samples are common in stores and supermarkets. Marsh, an American retail chain, found that 68% of samplers end up purchasing a product. ...

How strong is the zero price effect?

The zero price effect remains strong as shown in Figure 5, even when the trade-offs involve commensurate products and exchange media ('money'). ...

Do people subtract costs from benefits from free (zero price) products?

However, we propose that decisions about free (zero price) products differ, in that people do not simply subtract costs from benefits but instead they perceive the benefits associated with free products as higher. ...