Alex Mindlin writes in the New York Times that, in a year of retail gloom, marketers are making heavier use than ever of the freebie offer (“free 5 ounce bottle of conditioner included!”) and its enticing cousin, the BOGO (Buy One Get One Free). Researchers have understood for years that such offers hurt the perceived value of the product billed as the freebie. But a paper soon to be published in the Journal of Consumer Research shows another hidden cost of freebies.
In short, when retailers try to move an item by packaging it with a freebie, the item that isn’t the freebie also loses value in consumers’ minds. “When you resume selling it individually, they say, ‘Wasn’t this that item that you had to sell something else with, to get me to buy it? It must be pretty bad,’ ” said Michael Kamins, a professor of marketing at Stony Brook University who is one of the paper’s authors.
In one study, Mr. Kamins auctioned off 100 pairs of coins on eBay, each consisting of an Indian penny from 1865 and a less valuable 1901 penny. At the same time, he also sold some individual 1865 pennies, in auctions visible to bidders on his bundled pennies. When the bundles were advertised as “get a 1901 penny free,” the prices of the solo older pennies suffered; when the two-penny bundle was not billed as including a freebie, the loose pennies fetched a higher price.