Home Strategy Business The Art Behind “Free Gift” and Bundling Promotions

The Art Behind “Free Gift” and Bundling Promotions

Imagine that you’re selling shoes. You want a free Easter offer. Where are you going to picture it? For example, you might frame the deal as a free gift: “Buy a $50 sweater and get a free scarf! “And, you might view the deal as a bundle: ‘Buy a jumper and a scarf for $50! “These deals are basically the same. The only distinction is how they are framed. Does it matter? Does the advertising context impact the returns?

Psychological analysis has shown that it is important: the advertising mechanism you use will influence the attitudes and actions of your consumers.

Package Deals Evoke a Higher Desire to Spend One research by Priya Raghubir looked at how presenting deals as a free gift vs. a package affected how much consumers enjoyed the goods. Raghubir randomly allocated 74 undergraduate students to two words that included ads for Piasso pearls. The ads in each state is the same, save for the title.

In the free gift situation, the participants were told that Piasso’s pearl earrings were included as a free gift with the purchase of a $66 pearl necklace.

In the package situation, participants were advised they could buy both earrings and necklace for $66.

The participants were then asked how much they would be able to pay for the earrings themselves. Participants in the free gift scenario said they would pay less for the earrings than for the package. It seems that when you give away a “free” product, buyers continue to accept it less and pay less for it as a stand-alone product.

In our case above, buyers would be able to pay less for the scarf when sold on their own if the campaign used a “free” scarf frame relative to when using a package frame. Take-away: If you intend to demand additional premiums for the supplemental product after the deal, it is best to structure the offer as a kit. Avoid the “free gift” frame.

Package Promotions Improve Repurchase Intents Another research by Hsinhsien Liu and Hsuan-Yi Chou corroborated the above findings; they also observed that when promotional products are presented as a bundle, consumers consider the additional object, scarf or earrings to be worth more. But when the goods were presented as a free gift, consumers considered the same things to be worth less.

This research expanded the earlier observations by looking at the desire to re-purchase. Will the advertising structure affect how consumers are willing to buy the product at the completion of the promotion? Yeah, yeah.

When you have a free gift box, the buyers believe that the focal point, the jumper or the necklace is worth more and that the extra piece, the scarf or the earrings are worth less. After the sale is done, the consumers will be more likely to buy the focal item again, but less likely to buy the additional piece.

When you use the package, the result should be reversed. Studies noticed that consumers considered the focus piece, jumper or bracelet to be worth less in the package, and consumers indicated that they were less likely to buy such items after the deal had ended. But they were more likely to buy back the supplementary object, the scarf or the earrings.

Take-away: If you want to sell one of the main product, scarf or bracelet, after marketing, the free gift frame is easier. If you want to sell more of the extra items, scarf or earrings, the box frame is safer.

Free Gift Promotions Reduce Return Rates

A third research by Shinhyoung Lee and Youjae Yi looked at how the advertising used by the marketer influences the rate of return. Because generous return policy and online shopping are so common, many consumers make online transactions that they will buy later. Reducing the cost of return is very relevant for certain businesses. It points out that the marketing system used has an effect on the rate of return.

First, researchers discovered that while sales were presented as a free gift, the people in the sample were less likely to buy products after they purchased them. Real return rates decreased (first study) and the return expectation decreased (second study) when sales were presented as gifts rather than as bundles.

Second, scholars have found that the reason free gifts perform well is that returning a free gift improves the customer’s sense of perceived failure. In other words, consumers feel a stronger sense of disappointment when they return an individual element when it is “safe” than when it is offered as part of a package.

Take-away: if you want to reduce the cost of return, view your deal as a free gift.

Then what are you going to do?

How you frame the campaign affects: how the consumers see the importance of the goods in the offer; the desire of your consumers to buy the items after the sale has ended; and how willing your customers are to return your goods.

Your goods rely on what advertising approach you will use.

Use the ‘free bonus’ tactic if: you want consumers to see more of the higher price of the main item in the promotion; you want customers to buy more of the main item in the promotion; or you want to limit how many people return the items.

For eg, say you’re selling online writing lessons, and you’re going to include an SEO e-book in your promotion. And say you’re more interested in selling the courses than selling the e-book, so you don’t want people to call for their money back on the course. The free gift approach is actually best for you, as it will lead to additional purchases in the course and reduce the refund risk.

Use the “bundle” technique if:

you want consumers to see a higher price for an additional item; you want customers to purchase more of the additional item; or you don’t know about the refunds or it doesn’t matter to you.

For eg, assume you’re selling skincare products. You want to sell the moisturizers, and you’re going to use eye creams as a boost. Please tell me why you want the eye creams to sell well after the sale. So you may not usually consider returned objects. The box plan is actually best for you, as it will lead to more eye cream sales once the deal is over, because the cost of return is not important to you.

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