We are Predictably Irrational: The Cost of Zero

 
Free Isn’t Always a Good Thing

Spoiler Alert: Over the next few weeks we’re going to take a look at some of Ariely’s findings in his book, Predictably Irrational: The Forces that Shape our Decisions.

 

 

“Why We Often Pay Too Much When We Pay Nothing”

 

Ariely asks, “. . . what about the worthless FREE! stuff you’ve accumulated-the promotional T-shirt from the radio station, the teddy bear that came with the box of Valentine chocolates, the magnetic calendar your insurance agent sends you each year?” He wonders why we stand in long lines just to get something that is FREE, when often times, it isn’t even something we want or know what to do with.

The Draw Toward Free

When we get something for FREE it “feels very good. Zero is an emotional hot button-a source of irrational excitement.” Ariely explains that most transactions have an upside and downside, but “when something is free, we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is. Why? I think it’s because humans are intrinsically afraid of loss. The real allure of FREE! is tied to this fear. There’s no visible possibility of loss when we choose a Free! item ( it’s free).”

Ariely’s Study

Ariely sites an example courtesy of Amazon (France) to demonstrate his point. He compares the company’s sales when they offered to ship orders for 1 franc, to sales when they offered FREE shipping instead. Though 1 franc would seem like a steal for shipping, as soon as the cost to the consumer was FREE, there was “a dramatic sales increase.”

How to Handle FREE!

So what are Ariely’s recommendations to counter the enticement of FREE? First, realize most of us tend to get excited when we see the word FREE, but FREE doesn’t equate to value.

Second, remind yourself that just because something is FREE it doesn’t mean it is in your best interest to accept it, or to buy something to get it. Case in point, ever notice when watching a television sales commercial the last seconds of the advertisement offer a FREE gift, or they offer to double your order for FREE? If the item wasn’t something you really wanted, well, how can you refuse to buy it if you are getting double the amount or an extra something . . . for FREE?

Lastly, know FREE can be a trap or have a downside. Ariely reminds us to slow down and think about economics. What should “the pattern of choice look like?” Even though free equals zero cost, we should still do a cost-benefit analysis before we buy (or take something for free). Consider the same things you would when shopping for anything else you are paying for. Is it worth it to me? Do I want it? Do I need it? What if I bring it home? Where will I put it?

Predictably Irrational: The Forces That Shape Our Decisions

Dan Ariely

Harper Perennial, (2010), 349 Pages, $15.99

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