by Dr. Charles Alonzo Peters
Entering the Chicago subway station, I was reminded of the irrational power of “free”. Previously solemn commuters were now rushing the entrance nearly killing themselves trying to get one of the free coffee mugs being handed out by a local merchant.
From the way they were acting you’d think they were giving away gold. Yes “free” can make us do some crazy stuff. I’m sure if you put “Free” on a sack of manure you’d have people fighting over it.
I understand the power of free. I’ve fallen to its seductive charms all too often – the free T-shirt in college that enticed me to sign up for a credit card (leading later to over $5,000 in debt) ……. and the time I waited nearly two whole hours just to get into a free movie screening …. and the time I drove way out of my way to get the “free” cookie promoted at Dunkin’ Donuts.
Quite simply, “free” makes us think irrationally. Behavioral economist Daniel Ariely illustrates this point in his book, Predictably Irrational. Take the following scenario for instance:
You’re presented with the choice of a free $10 Amazon gift certificate, or the opportunity to purchase a $20 Amazon gift certificate for $7.
According to Ariely, most people instinctively chose the free $10 Amazon gift certificate. This despite the fact that purchasing the $20 gift certificate for $7 brings you more profit ““ $10 (free certificate) vs $13 ($20 certificate purchased for $7) ““ and thus is the better choice.
In another experiment Ariely uses Lindt chocolate truffles and Hershey Kisses.
Lindt chocolates are premium high end treats while Hershey Kisses are pretty standard candy fare. Ariely and his colleagues offered passer-bys the choice of purchasing a Lindt truffle for 15 cents or purchasing a Hershey’s Kiss for a penny.
Realizing a great deal when they saw one 73% of the participants chose the Lindt truffle.
The prices were then lowered by a penny ““ the Lindt chocolate reduced from 15 cents to 14 cents and the Kiss reduced from one penny to FREE.
Even though the Lindt chocolate was still the better bargain and still only 14 cents more expensive than the Hershey’s Kiss, the number of people now choosing the Hershey’s Kiss skyrocketed from 27% to 69%.
The power of the “free” Hershey’s Kiss had silently persuaded people to make the less valuable choice.
Marketers understand that “free” is our intellectual blind spot. They make full use of this fact to seduce us into spending more than we need. In essence, “free” has become the ultimate consumer trap.
Take freecreditreport.com as a prime example. Who hasn’t heard their cute jingles or seen their commercials plastered over the airwaves? Tempted by the offer of a free credit report, many have ventured to the website only to find that to receive the free credit report they have to sign up for an expensive credit monitoring service.
Yes they could cancel the service and still get the free credit report, but many forget to or never realize they signed up for the credit monitoring service in the first place!
Have you ever seen those magazine offers emphasizing 2 FREE Trial Issues. Who wouldn’t be tempted to to give it a try? – I mean it is a free trial, right? Well as with most every other offer, the devil is in the details. You see the 2 FREE Trial issues are free only if you decide NOT to purchase the subscription.
Your reward for taking the trial and actually subscribing to the magazine ““ the trial issues are folded into the regular subscription. Instead of getting 12 more issues, you receive only 10 more issues. This means you actually pay for the trial issues. So much for free.
Other’s have been taken in by informercials that offer a “free” trial CD, video, or sample only to find that while the sample item was indeed “free”, the over inflated shipping and handling charges were surely not.
Yes in this society “free” always seems to have some hidden strings attached. So how do you keep from getting suckered by the “free” trap?
First. Always read the fine print. There’s bound to be a catch somewhere – the free two months gym membership, only valid if you sign up for a three year contract.
Second. Consider the opportunity costs. The opportunity cost is simply what you would do if you didn’t take advantage of the “free'” offer. If you wait two hours in line to get a free movie pass your opportunity cost is all the things you could have done with your time instead of wasting it standing in line.
Finally, think about unforeseen costs associated with the “free” offer. That “free” donut offer may sound tempting until you take into account the gas, your time, and the fact you’ll likely purchase something in addition to your donut.
So BMWK family, have you ever been seduced by the “free” bug? What are some of the “free” traps you’ve encountered? What’s the craziest thing you’ve ever done to get your “free” on?
Over the next few weeks you’ll get great weekly insight and tips on managing your greenbacks by Dr. Charles Alonzo Peters of MochaMoney.com so be sure to check back.
The funniest instance of this is at business conferences. Even though the same folks attend, they will still fill thir bags with horrible crap from vendors.
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LOL – You're quite right. And how about those cheap conference bags that they give us to put all that junk in. I must have a dozen or so laying around the crib.
And 99% of that stuff is junk… straight junk
I love the swag bags…but I must admit I don't use 90% of the free stuff/junk in them.
I have learned that free turns into clutter very quick.
Also
My husband has got me in the habit of doing the math. If the numbers do not add up, then it is not a deal or “Free”
Now this is free, but a waste of space
I have a bad habit of downloading “Free” books for my kindle… They are OK books, But not something I would buy.
A free installation with ADT turned into $165 bill for a sensor that I did not want!!!
Those Direct TV and cable company free installations end up costing you a lot of money in the log run.
I know what you mean. They'll catch you every time. The free cable modem installation is the same way.
I take advantage of free offers and always set a reminder in my calendar to cancel whatever it is before I get charged. I've gotten a lot of good stuff like that.
I used to do that until one of the companies made it nearly impossible to actually get through to cancel! I even stopped payment after many email, and phone calls and they just charged again under another name. After disputing 3 different charges for the same thing under different names on my bill, I finally had to close the credit card and get a new one with a new number!
Free should be free w/out me giving a credit/bank card number and having to cancel 30 days later. I guess the craziest thing I got free for 30 days was my “Credit Report”. I don’t think I need to pay someone 10 bucks a month to moniter it. If your bank knows you they will give you a personal call to say “Wow, you went on a shopping spree”. I do like to download coupons for groceries and even they are not free. Be careful what you download because all your info is in someones data base, to solicate more free things. I have found down loading somethings only has me going to the computer store to get rid of a virus w/my computer.
GREAT post! I'm teaching my 12 year old daughter RIGHT NOW that NOTHING in life is free!!! She will see something in one of her tween magazines or something online and I have to constantly remind her!
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