FREE. Its a powerful word. Everybody loves freebies.
Besides its a great way to attract customers right?
Well, maybe not.
In a fascinating podcast on Derek Halpern's Social Triggers, Harvard professor Francesca Gino, author of the book Sidetracked, shared that offering stuff for free could work against your interest. On the contrary, making your customers pay for things - both in terms of money and effort - would actually increase the perceived value they have for your product or service.
Here are more nuggets from her research.
The Greater the Price, the Higher the Perceived Value
Generally speaking, we tend to view a piece of information or a product to be more valuable if we pay for it. Free stuff tend not to attract the same degree of affection as something which we paid blood money for. In fact, the higher price we pay, the greater the quality and value we equate to that thing.
This is why top-notch consultancies like McKinsey, Bain and Boston Consulting Group can charge astronomical rates and still have a pipeline of clients waiting to buy their services. In the same vein, cheapo consultancies find it hard to attract customers even though they may offer essentially the same services. Similarly, luxury brands like Louis Vuitton, Gucci, and Manolo Blahnik can charge an arm and a leg for items that commodity brands charge a pittance for.
It's Not Just Money - Time and Effort Matters Too
In a similar fashion, making your customers jump through hoops also makes them treasure what you offer a lot more. This is evident in restaurants and hawker stalls which make their patrons stand for hours in line to get in. Often, the longer the customers have to wait, the greater their hunger and the bigger the order!
The more involved in time and effort your customers are, the more engaged and committed they are to your brand. I suppose this is why fans of LEGO are so hardcore relative to other "low involvement" toy brands.
The Overriding Influence of Emotions
Have you woken up on the wrong side of the bed, and felt thereafter that everything went downhill that day?
Well the real reason why things happened that way is because our overwhelming feelings of negativity (anger, frustration, sorrow) affected everything else which we did thereafter, making that day a total wash-out. Similarly, a single negative encounter early in our overseas trip could affect the outcome of our entire vacation.
To overcome this, businesses should find opportunities to sweeten their customer experiences early in the game. First impressions count after all. Eliminate all negative hygiene factors - bad smells, ugly furniture, ill fitting clothes - and reduce the likelihood of irritating your customers before they have a chance to sample your product.
The Power of Unexpected Gifts
This brings us to the next psychological trigger - gifting. Popularised by Robert Cialdini in his seminal book Influence, gifts exert an inordinate amount of goodwill even if they aren't costly. If giving our customers presents makes them more likely to continue buying from us, surprising them with unexpected gifts may delight them even more.
The age-old adage of "under promising and over delivering" can be stretched further with unexpected gifts. Customers who receive such surprises are likely to reciprocate the goodwill by spreading the word. This ultimately translates to good business.
Stress Reducing Rituals
Last but not least, creating rituals helps people to overcome high stress situations. This is especially prevalent in competitive sports where athletes do weird stuff like wear a certain necklace, eat a particular cookie, or sing a certain song before a big game. Similarly, people in high anxiety jobs may embrace certain rituals like eating a particular breakfast or chant a certain mantra before a big meeting.
In a same vein, businesses can develop their own customer rituals and associate these with certain "high stress" occasions. Two good examples are the chocolate drink MILO, which has successfully associated itself with giving energy to kids in sports. and Brand's Essence of Chicken, which is closely associated with helping kids study and do well for their exams.
Are there more psychological quirks which businesses can consider? Do share them with me.
Courtesy of Synergy Says
Labels: behavioural economics, behaviours, business, consumer psychology, derek halpern, influence, management, marketing, Social Triggers