When you hear the word free, you think it’s something that’s awesome and doesn’t cost you anything at all. But, there’s actually more to it than meets the eye...
When consumers don’t get what they pay for, they’re quick to complain and even quicker to stop using your product or service entirely.
Here we'll explore why free does not work and the psychology behind why we’re suckers for free stuff, so let’s get started!
Intrinsic vs Extrinsic Motivation
Intrinsic motivation is when we want to do something because it's the right thing to do or because it's a challenge. Extrinsic motivation is when we want to do something because there is some type of external reward. When people are extrinsically motivated, they typically show more interest in an activity and are more likely to perform better than those who are intrinsically motivated.
So what does this mean for businesses? To be successful, you need customers with both intrinsic and extrinsically-motivated customers.
Funnelling Behavior
The psychology behind why we are suckers for free stuff is the Funnelling Behavior. This behaviour stems from a psychological principle called loss aversion. Loss aversion occurs when people don't want to lose what they have, so they prefer to take on more risk in order to keep it. We will take on extra risk if it means there's an opportunity to save something that we've already got.
Another name for this type of behaviour is the 'sunk-cost fallacy.' A sunk cost is a cost that has already been incurred and cannot be recovered. There are several examples of sunk costs like money you invested in stocks or time spent on a task but then stopped before finishing it. For instance, maybe you started reading this blog post but stopped because you were too busy with work and forgot about it later. Now you want to know how much, further along, you would have been if you had finished reading, but there's no way of knowing how many more paragraphs were ahead.
Instant Gratification
We all want our lives to be better. Instant gratification is what we desire, but in most cases, it is not what we need. If you offer something for free, people will sign up and use the service because they feel like they are getting a great deal. But without any commitment, there is no way to make the consumer happy or continue using the service after the trial period has ended.
You cannot build trust with your consumers if they know that at any moment you can just stop offering them your product or service for free. Without investing in marketing and promotion, it's hard to get consumers on board and keep them from jumping ship when a competitor offers the same thing.
Most businesses do not have money to spend on building their business, so free products may seem enticing. However, once you start spending money on advertising and customer service then your costs start going up while revenue stays stagnant or decreases due to customers jumping ship as soon as their trial ends.
Misconceptions About Free
The psychology of free is complex, but it boils down to two main points.
First, we love getting stuff for free because it makes us feel less guilty about buying other things.
Second, it's more difficult to place value on something that has no cost attached to it.
Combined, these two effects make us feel like we're getting a better deal and we end up overspending in the long run.
For example: If you buy $10 worth of cookies at the supermarket, you might buy another $5 worth out of guilt because they are so cheap. In contrast, if you buy $5 worth at Target, you would be less likely to purchase an additional $5 worth after the first purchase.
A recent study found that people don't value what they get for free as much as something they bought. When people pay for a product, they have invested in it and are more likely to use it. Products given away usually aren't used as much because there's no commitment or investment on the part of the person using them.
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