CONSUMER BEHAVIOUR & DIGITAL MARKETING
Why Do We Buy? Part 3: Promotional Psychology & the Allure of ‘Free’
Understanding what drives sales frenzies, and why promotional sustainability matters for brands and industries.
Promotions and offers just seem to work. They hook our attention and change the way we see and act as shoppers. How does that happen to us? Why do we stubbornly persist with browsing to find something because there’s extra value at stake?
Let’s take a look at how promotions and offers affect our behaviour as consumers, and how to plan for better success when crafting your own offers.
Brands rely on promotional tactics in times of high competition or low consumer demand to foster and convert heightened shopper engagement. The methods shift and grow over time and across technologies, but they share common foundations in the way that they evoke these responses from consumers.
Why are Promotions so Effective?
Promotions are a well-trusted means of accelerating the transformation of desire into revenue by generating a perception of value and fostering emotional engagement with consumers. Value perceptions are founded in comparison points between full and reduced prices across a range of formats summarised in the Value Perception Matrix.
Emotional engagement ties us into persisting with the search to buy something of value, even if that value only exists at a reduced price.
- Time spent browsing and considering options are sunk costs that need to convert into some sort of gain.
- Loss of potential value to other customers through limited stock, or the expiry of a promotional timeframe.
Value perception and emotional investment unlock the possibility for us to compromise on brand, features, or function. This in turn shifts our standards, acting as a gateway to a wider scope of potential. The perceived savings can then be spent on additional options that we may not have otherwise purchased. Demand can be driven further by the desire to capitalise on short-term value opportunities; causing us to spend more in total than we would have at full price, and often on more items than we’d intended.
Any combination of those factors enables promotions to drive higher average order values and increased conversion rates compared to regular trading. The key factor to realising this potential is through well-structured framing. This refers to how the presentation of an offer translates to a favourable interpretation by consumers.
The mechanic by which customers redeem any offer acts as a supplementary factor in the uptake of any promotion. Mechanics are applied as pricing rules, codes and coupons, or rebates. Brands combining strong offer framing and user-friendly promotional mechanics have a higher likelihood of achieving desirable outcomes as a result.
Successful promotions can be further amplified by encouraging users to act quickly, extend their browsing, add extras, and save more; all while reinforcing value and emotional engagement. Balanced against this intent is the need to make the path towards purchase as frictionless as possible. Delivering a hassle free navigation, discovery, and payment experience allows consumers to enjoy their time spent shopping without risking abandonment due to poor service, lack of choice, or interruptions.
Why is ‘Free’ so Appealing?
Possibly the most compelling emotional trigger for consumers is the idea of getting something for free. It causes us to part with money more easily, abandon our concerns, and often feel like we actually owe the brand or person that gave us something — either consciously or not. This is known as the Zero Price Effect. It occurs when the price of a product or service hits zero, thereby eliminating any costs from a consumer’s cost-benefit analysis, leaving only benefits.
- A gift with purchase; either declared to encourage buying, or as a means of surprise and delight upon opening.
- Free shipping as a promotion or with minimum spend.
- As free samples with signup, in person, or included as a bonus with a purchase.
- Offering free returns for online purchases.
- Initial free trial periods before a billing cycle starts.
Widespread adoption of ‘free’ incentives by retailers has contributed to a diminishing impact over time. The majority of online shoppers now expect free shipping, whereas it could previously be framed as a saving.
A similar effect can be seen in competitive industries where rival brands liberally offer free trials to reduce signup friction. This leads the industry towards adopting free trials as the expected norm; slowly eroding perceived value, while empowering consumers to substitute between alternatives with little or no risk. These conditions pose dangers to brands in the form of higher customer acquisition costs, exploited trial systems, and increased customer churn.
The Power & Dangers of Combined Incentives
Consumers inherently weigh the costs and benefits of any purchase. This simplifies down to a likelihood of buying, which retailers and service providers can shift in their favour by fostering demand using promotions and incentives. Each addition of value or emotional engagement helps to further support the benefits of buying, while removing barriers and overcoming objections lessens any reasons not to buy.
Brands should always be careful with how value is perceived under any combined offering. A low price with added incentives may well set the benchmark for consumers future expectations of the wider category. The brands that engage in aggressive undercutting often struggle to attract loyal customers over the longer term if the perceived value of a product or service alone is too low to be sustainable.
Setting Your Own Strategy
Successful promotional strategy requires considered aspects of framing, mechanic, and consumer touchpoint management.
- Look at the promotional framing through the consumer’s eyes rather than just your financials. How will they perceive value in what you’re offering?
- Define the scope of your offer. Is it aimed at generating action from all consumers, or specific actions from targeted users?
- Segment regular discount shoppers. Can they be swayed towards full price shopping using branded touchpoints, or should you save those consumers for promotional material only?
- Avoid throttling revenue generation by using all channels available to generate sale awareness and drive purchases. Are you maximising the potential exposure of sale messaging to eligible customers?
- Create value and urgency while retaining a sustainable market perception. What is it that’s driving behaviour? Are you damaging your brand or the wider industry? If so, how can you reframe value?
- Encourage engagement by displaying information on promotions, bundles, or dynamic shipping throughout the shopping journey. How are shoppers informed and encouraged while browsing?
- Provide a clear path towards purchase. Can users find advertised products or categories, browse, make a selection, then check out easily?
Evaluating the decision to implement sustained free shipping requires the assessment of multiple factors.
- Setting a threshold that encourages a higher average cart.
- The viability of margin against the cost of shipping, or the potential to absorb the price of shipping into the product while remaining competitive.
- Whether it’s available to everyone, club members, or account holders.
- Local and global capacities to offer the service.
- The potential for an additional paid express shipping tier. This can always become ‘free’ at a higher spend threshold than standard free shipping.
- Working collaboratively with your logistics provider to scope the optimal shipping solution outside of purely absorbing the current costs.
- Testing the concept before a sitewide launch. This allows you to tweak parameters and evaluate potential costs and benefits.
Take similar care with other incentives to balance engagement with longer term value and sustainability.
- Ensure any free samples are relevant, display value, and are accompanied by collateral that encourages recipients to purchase the product.
- Make gifts with purchase straightforward to redeem with a low risk for disappointment. One size fits all, popular complimentary categories, consumables, and seasonal relevance can help to increase uptake.
- Structure any free trial to be well supported with marketing and service that encourages future purchases or subscription. Treat an abandoned free trial like an abandoned cart — there will be multiple reasons why someone would have chosen to cancel. Analyse results and survey customers to alleviate future losses and to recover their business.
- With any ‘free’ incentive it’s essential to set plans that increase customer lifetime value and offset lower margins or losses due to internalised costs or loss leader acquisitions.
Well-structured offers have the potential to drive strong results as emotionally engaged shoppers deliver increased conversion rates and higher revenue. These can be applied across both widespread and micro-targeted groups of consumers to encourage specific actions including immediate conversions, new paid subscribers, or recovering a shopping cart. The short-term effectiveness of offers can also become an addictive lever for brands to generate spikes in their success metrics. Balance them with caution; using a varied, tested, approach to uncover effective methods of execution that tie into the wider consumer lifecycle rather than a single conversion point.
That concludes our look into the psychology of promotions and offers as the final instalment of the “Why Do We Buy” series. Thank you for taking the time to read this article. If you would like to talk more about activating your own strategy, please feel free to contact me via my website or LinkedIn.
Missed Part 1 & 2 in the “Why Do We Buy” series? Read them here:
