Marketers often entice customers to buy a product by offering a free gift with the purchase. They might, for example, offer a free half gallon of milk with the purchase of Oreos or a pair of tickets to Disneyland with the purchase of an airline ticket. Research at the University of California, Berkeley, however, suggests this approach may not be such a winning proposition.
Although it's a common belief that promotions improve short-term sales, the study discovered that offering a free gift with a purchase can make consumers denigrate the perceived value of the free product. It can also make consumers expect to pay less for the free product if they purchase it in the future, or they may be hesitant to buy the product at all.
Researchers believe that consumers interpret free gift promotions as a sign that the free product does not have its own intrinsic value. Oddly, these inferences carried over not just to the brand being offered as a free gift, but to other brands in the same product category as the gift.
A point of interest for brand managers is that consumers' reactions can be swayed if the main product that is being paired with the free gift is known to have a high value. Apparently, "price promotions are more than just money off—they are a source of information that consumers use to make judgments about products and their prices."
The Po!nt: Partner carefully when your product is given as a free gift in a joint promotion—you risk devaluing your brand.
Source: "Free Gift with Purchase: Promoting or Discounting the Brand?" by Priva Raghubir. Journal of Consumer Psychology, 2004. Download a PDF of the article here.
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