Zero-price effect

A price of zero is not just a low price. When something is free, people do not simply subtract a smaller cost from its value. They see the item itself as better. That is the zero-price effect, sometimes called the power of free.

It matters for your spending because free rarely comes alone. Free shipping, free gifts and free trials sit at the start of a purchase. The good feeling they give can carry you into spending you would not have chosen with a clear head.

The chocolate booth at MIT

In 2007, three researchers published a paper in Marketing Science: Kristina Shampanier of MIT, Nina Mazar of the University of Toronto and Dan Ariely of Duke University. Standard theory says people pick the option with the biggest gap between benefit and cost, so cutting two prices by the same amount should not change the ranking. The authors suspected zero would break that rule.

They set up a booth in MIT’s student center with two boxes of chocolates and a large sign: one chocolate per person. One box held Hershey’s Kisses, the other Lindt truffles, with prices on small flat signs. In one condition the Kiss cost 1 cent and the truffle 15 cents. In another, both dropped by a cent, so the Kiss was free and the truffle 14 cents. A third made the Kiss free and the truffle 10 cents. In all, 398 people took part.

At 1 cent and 15 cents, the truffle won easily. Among people who took a chocolate, 73 percent chose it and 27 percent took the Kiss. When both prices fell by one cent, the result flipped. The Kiss’s share rose to 69 percent and the truffle’s fell to 31 percent. Cutting the truffle to 10 cents did not win it back, and the Kiss still took 64 percent.

The team repeated the test at an MIT cafeteria, adding the chocolate’s cost to the bill customers were already paying, so a free chocolate saved no fumbling for change. The free Kiss’s share still jumped, from 21 percent to 71 percent. A follow-up offered a $10 or a $20 gift certificate, with the $20 one always costing $7 more. When the $10 certificate was free, demand for the $20 one, worth $13 more than its price, fell to zero. The authors concluded that zero is treated as qualitatively different from other numbers.

One finding stands out for shoppers: a single cent was enough to flip the choice.

Not a decoy trick

The authors checked whether their result was the decoy effect, where a clearly worse option nudges people toward another. In a survey with no option to take nothing, the free Kiss’s share still rose from 28 percent to 92 percent, and the truffle’s fell from 72 percent to 8 percent. Free did the work on its own.

Why free feels so good

The authors tested three explanations: social norms, the difficulty of putting a dollar value on a pleasure, and affect, the good feeling a free offer gives. Affect came out as the most likely cause. A free offer sets off a warmer reaction, and that warmth makes the free option look better than it really is.

There is also nothing to hurt. A free item asks for no payment at all, so the pain of paying that usually slows a choice never arrives.

How a free cup becomes a kitchen upgrade

A coffee shop offers a free reusable cup with any bag of beans. You buy a $15 bag you had not planned on, just to get the cup. The cup fits only the shop’s $40 travel brewer, so that comes next, then a $20 grinder because pre-ground beans taste flat in it. A free cup has turned into $75 of gear, plus a habit of buying beans to feed it. This is the pattern behind the Diderot effect: once one item is home, the next one feels necessary. Free did not save you money. It opened the door.

Where zero turns up at checkout

Free shows up wherever a seller wants you to take the first step, as our page on the Diderot effect in marketing explains:

• Free shipping thresholds. An order just under the line gets an add-on you did not need, bought to dodge a small fee.
• Gifts with purchase. The free item becomes the reason to buy, and the purchase becomes the price of the gift.
• Free trials. A trial turns into a subscription, and the subscription comes with paid upgrades and add-ons.
• Buy one, get one free. The second item is free only if you buy the first, so one purchase becomes two.
• Free starter kits. A free device or sampler commits you to refills you pay for as long as you use it.

How to put a price back on free

1. Price the free item first. Before you take it, ask what you would pay for it. If the honest answer is nothing, the offer is not saving you money.
2. Judge the add-on on its own. When you are short of a free-shipping threshold, ask whether the extra item is worth its full price. If not, pay the fee. Our guide to stopping impulse buying covers more checkout tricks like this one.
3. Set the cancel date when the trial starts. The day you sign up, put a reminder in your calendar a few days before the trial ends.
4. Watch kits and bundles. Starter kits and “pairs well with” offers are built to lead somewhere. The complete-the-look trap shows how to spot them.
5. Total the whole chain. Add up the refills, upgrades and matching items a free offer leads to with the Chain Cost Calculator, then decide.

When free really is free

Taking a free offer is not always a mistake. If you would have bought the item anyway, getting it free is a plain saving. A free sample that replaces a purchase saves money too. The trouble starts when free pulls you toward something you did not want, or away from a better deal, the way the free Kiss beat a truffle most people preferred at one cent.

Here is the test. Imagine the free item cost one dollar, or even one cent, as in the study. Would you still choose it? If yes, take it and enjoy it. If no, the price was never the reason. The feeling was.