What is the Power of Free concept?
The Power of Free concept, or the “Zero Price Effect,” describes how people tend to choose a product if it includes a free element even though it has little inherent value.
Explanation
The zero price effect is a psychological effect stating that a customer is more willing to buy something if something for free can be received—even if it is only minimally cheaper.
People act as if zero pricing of a good not only decreases its cost but also adds to its benefits. Thus, customers may also be willing to spend more on a product to save the price of another one.
What are the disadvantages of the Power of Free?
It can elevate your costs
The zero-price effect can be expensive, especially for buy-1-get-1-free promotions! Make sure you use these measures sparingly to avoid cannibalizing your revenues.
It does not work for every business model
The Power of Free is not one-size-fits-all. You can add features, upgrades, or additional products depending on your product or service. Select carefully and consider your business model, costs, and strategic goals.
It differs in countries and industries
If customers distrust the free element, the effect can also have a negative impact.
Additionally, the effect is less significant in industries where customers make more frequent decisions and gain experience with what they need (e.g., mobile plans).
Further reading
"Nudge: Improving Decisions about Health, Wealth, and Happiness" Richard H. Thaler & Cass R. Sunstein
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