First, in many circumstances, you can give away a free product or service on your site and get more marketing value than the free motorcycle product or service is worth. This is a basic overview of the zero-price effect.
In standard economic and marketing laws, your target audience will choose the option with the most benefit after a cost-benefit analysis. The effect is linear, meaning the change in the cost and benefit in your visitors’ evaluation of the value increases or decreases in a straight line.
However, with free products, if visitors have a low cost of acquiring them, they will value the product more than it is worth. Subsequently, you will see an increase in the perceived value of your offering. Before you read on, this marketing 101 will help you if you are starting out promoting your online business.
When Zero-Price Works
Not always will you find that offering a free product follows the zero-price effect. And this happens when the cost of getting the free product is high.
Here’s an example of someone buying motorcycle boots that cost $140. Let’s say someone who purchases the boots gets a free pair of cold-weather motorcycle socks that regularly cost $12.
Now, if this offer is available on your site, it will positively impact sales. And this is because it doesn’t cost your audience anything extra. In this example, people will put an over-inflated value on the socks due to the zero-price effect. But if riders can only get the socks by going to your brick-and-mortar store, it won’t have a positive impact or will be much lower.
Next, people will need to drive to your business’s location, wait to buy the boots, and then go home. This costs them their time, which people highly value. Also, people don’t like to wait around in stores.
One common zero-price effect offer is free shipping. A related marketing statistic is that 49.3% of people said free shipping is the most important factor when shopping online (Oberlo.com).
To maintain the same net profit, you can raise your product’s price. For example, if you have a $100 product that usually ships for $8, you’d charge $108. Now, you have the zero-price effect. If the product were priced at $108 with free shipping, people would choose the offering with free shipping rather than the one that charges for shipping separately.
Overview of the Zero-Price Dynamic
In summary, what’s important for your search & web agency to know is that people have difficulty resisting free. The demand for your products or services is significantly higher if they include a free product with low related costs. Besides that, free can help you avoid lowering the perceived quality of your products when lowering the price.
Finally, two related articles on our biker blog that might help you are about how discounts can hurt perceived value and how quality service increases sales.
