The Psychology Behind Free Gifts VS Price Discounts
Giving away free premium gifts with purchases is a common sight, especially in Singapore. They are especially useful to attract new customers and sway on-the-fence buyers over. But how do free gifts compare to price discounts?
1. Deters customers from being used to buying at ‘steep discounts’
Having a sale on your product at 20% off may increase your sales volume largely within a short period, however this comes at a large cost.
For example,
Frozen Pizza Sale
Many of your customers will then be used to buying the item at a steep discount. For products that are simply placed on shelves in supermarkets like food or pharmacy stores like beauty products, service levels are probably not a differentiating factor when it comes to purchasing them. As compared to a haircut or facial, customers may be willing to pay a little more for better service quality, experience or outcomes.
To simply put it, price sensitive customers are unlikely to come back after the sale and will be trained to buy your pizza only at a certain price, or only during sales.
Instead, a curating a free premium gift costing between 15-25% of your product selling price will be seen as a limited edition thing, and to them once it is gone, it won’t come back. Maybe a new gift-with-purchase campaign will eventually come, but that particular item, particular design, particular color that they want, will not come back.
Whereas for price discounts, once they get used to buying at a heavily discounted price, your customers will just wait it out or buy from the other cheaper brand.
2. Getting something for nothing
You aren’t exactly giving your customer the free gift for nothing, they would still have to buy your product, and likely at the original price. But the marketing scheme that comes into place is that they think they are getting something for nothing.
For example,
FREE Pizza Cutter & Serving Tool
The customer is paying the original price of S$9.95 for your frozen pizza, while getting a FREE pizza cutter and serving tool. Both premium gift items complements your original product, while adding another layer of value to the customer.
The customers think they are getting the pizza for essentially free, since it would have costed them more than S$10 to get the tools from elsewhere. Moreover, they come branded with your logo printed, making it an irresistible, limited edition item that they would want to own. It can’t be bought from elsewhere.
And if you had procured the two items in bulk (thousands), it would have costed you just around S$2 for the set with your logo engraved on it. It’s a win-win situation for both parties.
Your customers would just naturally assume that they got an incredible bargain out of this deal, and having your logo on the pizza tools helps increase brand recall on many occasions, making it the top-of-mind choice whenever they are purchasing pizzas in the future.
Also knowing that since the item is limited edition or whilst stocks last, there would be an immediate call to action to compel them to make the purchase on the day itself.
Unlike price discounts, they know this is for a limited quantity and time only.
3. Attract a new group of customers
The human buying decision process is often an emotional rather than rational one. Perhaps this customer, who never thought of buying your brand or product,
– Decides to do so one day because of the free gift. Call this impulse shopping.
– This other person who was having a bad day and needed some retail therapy.
– Or this other housewife who loves to share with her WhatsApp or Facebook group on all the good buys everywhere. Creating buzz for your marketing campaigns.
If you’ve got them to at least try your product, you would stand a chance of making them your repeat customer in the future, rather than your brand’s products being obsolete and never coming across their mind.
4. Convenience
Free premium gifts typically take months of planning for big campaign giveaways, along with several rounds of sample production if small changes are required. This takes time and energy, not forgetting administrative work.
As compared to a price discount, which is a rather straightforward process.
However, in the long run, the cost-vs-benefit of doing free premium gifts is definitely worth your team’s time and effort.
At Obok, we have an all integrated client management system to consolidate your enquiries, orders neatly in one securely encrypted portal. We also provide other value add services such as helping you brainstorm ideas for your giveaway campaigns, as well as taking care of the small details in your sample and mass production. Make Obok your preferred choice of corporate gift provider, speak to us today and we’ll turn your marketing ideas into reality with ease.
