[Study] How Do Offers of Free Gifts Impact Purchase Likelihood?

Several months ago, I read what I thought was a revolutionary book in marketing and customer service. In What’s Your Purple Goldfish?, marketing strategist Stan Phelps lays out a framework derived from collecting 1,001 examples of companies that go the extra mile in serving their customers. In the book, Stan uses an acronym “G.L.U.E.,” which stands for, “Giving Little Unexpected Extras.” Many of the stories Stan talked about involved companies that give free products, services, samples, and amenities when customers make purchases.

What fascinated me so much about many of these examples was the “unexpected” dimension. These freebies were not advertised ahead of time. New customers were often surprised to receive them after making purchases. These little extras aren’t thrown in to sweeten the deal. The deal has often already made. Rather, they are thrown in to sweeten the customer’s experience after the deal.

Samples aren’t free for the companies who give them. Neither is labor for providing unexpected after-market service. Treating customers extravagantly can be expensive. Does failing to alert customers of the extras they will receive diminish the marketing value of the freebies? Should companies just throw in extras after purchases or should they use the extras as incentives to get customers to make purchases? A new study sheds some light on these questions…

Article Summary: Effectiveness of Uncertainty in Marketing Promotions Involving Free Gifts

Laran J, Tsiros M. An Investigation of the Effectiveness of Uncertainty in Marketing Promotions Involving Free Gifts. Journal Of Marketing. March 2013;77(2):112-123.

Juliano Laran and Michael Tsiros, marketing professors at the University of Miami, endeavor to answer a particular question regarding the offering of free gifts in marketing. They want to know whether customers will more likely to make purchases if they know which free gift they are going to get, or if they don’t know which free gifts they are going to get.

What they discover is that it is to do less with the gives and more with the nature of the purchasing decisions. Cognitive decisions, those that involve only mental calculation, provoke customers to require knowledge of the free gift upfront in order to make a purchase. However, affective decisions, those that involve emotional elements, provoke customers to prefer to be surprised by the free gift in order to make the purchase.

Theoretical Framework

Laran and Tsiros discuss the previous research done on expectations and uncertainty. Much of the research from economics and psychology over the years has indicated that people generally tend to react negatively to uncertainty. However, recent studies have shown that, in offering an array of potential free gifts, consumers tend to expect the best possible outcome. Therefore, whether you tell the consumers they will get the optimal free gift or you simply include it in an array of other gifts, they will assume that they will end up with the optimal gift.

The authors of this article take the question in a different direction. They want to know whether or not the emotional nature of the purchase has an effect on the likelihood of purchase when the free gift is known and when it is not known. Therefore, the authors come up with the following two hypotheses:

  • H1: In non-emotional decisions, promotions in which the free gift they will receive is not known will result in a decreased likelihood of purchase compared with promtions in which the free gift they will receive is known.
  • H2: In emotional decisions, promotions in which the free gift they will receive is not known will result in a increased likelihood of purchase compared with promtions in which the free gift they will receive is known.
The authors then conduct a series of studies to test their hypotheses…

Study 1

In the first study, the authors had an employee of a restaurant document the results of 105 customers who were being asked whether or not they wanted to try the special of the day. The customers were presented with one of the four situations:

  1. An offer of a free can of pop accompanied by a sign that read, “Think About It
  2. An offer of being surprised with either a free can of pop or a free bag of chips accompanied by a sign that read, “Think About It
  3. An offer of a free can of pop accompanied by a sign that read, “Feel the Love
  4. An offer of being surprised with either a free can of pop or a free bag of chips accompanied by a sign that read, “Feel the Love
The results, by a substantial margin, demonstrates that, when thinking rationally, purchases are more lightly to occur when consumers have all the information upfront. However, when employing their emotions, consumers are more likely to make a purchase when they are surprised by the free gift that they receive.

Study 2

In the second study, 163 students were surveyed in laboratory about which circumstances would cause them to purchase a cell phone. Each of the students was presented with one of the following six situations and then asked whether or not they would purchase the cell phone.

  1. The phone would be used only for work (cognitive decision) and the students would, for sure, get a free silicone case or a free pair of earphones (some students were promised the case and some the earphones, but all students in this case knew for certain which free gift they would receive).
  2. The phone would be used only for personal use (affective decision) and the students would, for sure, get a free silicone case or a free pair of earphones (some students were promised the case and some the earphones, but all students in this case knew for certain which free gift they would receive).
  3. The phone would be used only for work (cognitive decision) and the students would, with 75% certainty, get a free silicone case or a free pair of earphones (some students were promised a greater chance of getting the case and others a greater chance of getting the earphones, but all students in this case knew with 75% certainty which free gift they would receive).
  4. The phone would be used only for personal use (affective decision) and the students would, with 75% certainty, get a free silicone case or a free pair of earphones (some students were promised a greater chance of getting the case and others a greater chance of getting the earphones, but all students in this case knew with 75% certainty which free gift they would receive).
  5. The phone would be used only for work (cognitive decision) and the students would have a 50% chance of getting the free silicone case and a 50% chance of getting the free pair of earphones.
  6. The phone would be used only for personal use (affective decision) and the students would have a 50% chance of getting the free silicone case and a 50% chance of getting the free pair of earphones.
The results of the study demonstrates that, when making rational decisions, people tend to prefer having a greater knowledge of the free gifts they will receive upfront. However, when making emotional decisions, people tend to prefer having less knowledge of the free gifts they will receive upfront. This occurs, not only on an either/or basis, but also on a continuum of certainty to uncertainty.

Study 3

In this study, 224 students were again surveyed about whether or not they would purchase a cell phone based on the free gifts that accompanied it. This time, the participants were prompted to make an emotional decision with the statement, “a phone that you will love and will keep you company any time of the day.” In this study, there were four different free gifts available with the purchase of the cell phone. Like Study 2, students were presented with six different options:

  1. The students were told which gifts they would receive (Certainty) and were offered one of the four gifts.
  2. The students were told which gifts they would receive (Certainty) and were offered two of the four gifts.
  3. The students were told which gifts they would receive (Certainty) and were offered three of the four gifts.
  4. The students were not told which gifts they would receive (Uncertainty) and were offered one of the four gifts.
  5. The students were not told which gifts they would receive (Uncertainty) and were offered two of the four gifts.
  6. The students were not told which gifts they would receive (Uncertainty) and were offered three of the four gifts.
The results of this study demonstrate that, when an emotional decision is made, people tend to prefer to either get more gifts with greater certainty or get fewer gifts with less certainty.

Study 4

In this study, 387 students were surveyed about whether or not they would have an interest in being contacted about the purchase of a laptop computer that came with the offer two different free gifts: a car charger and an external mouse. The students were then presented with eight different options:

  1. The students said they would use the laptop for work (Cognitive) and were told which gift they would receive (Certain).
  2. The students said they would use the laptop for work (Cognitive) and were told that they would receive one of the gifts but wouldn’t know which one (Uncertain-control).
  3. The students said they would use the laptop for work (Cognitive) and were not told which gift they would receive but were shown pictures (Uncertain-pictures).
  4. The students said they would use the laptop for work (Cognitive) and were not told which gift they would receive but were given detailed attributes of each gift (Uncertain-attributes).
  5. The students said they would use the laptop for personal use (Affective) and were told which gifts they would receive (Certain).
  6. The students said they would use the laptop for personal use (Affective) and were told that they would receive one of the gifts but wouldn’t know which one (Uncertain-control).
  7. The students said they would use the laptop for personal use (Affective) and were not told which gift they would receive but were shown pictures (Uncertain-pictures).
  8. The students said they would use the laptop for personal use (Affective) and were not told which gift they would receive but were given detailed attributes of each gift (Uncertain-attributes).
The results of this study further demonstrate that, in emotional decision-making, people prefer to be surprised. In rational decision-making, people prefer to have as much information as possible upfront before making the decision.

Real-World Implications

Okay, so this research article turned out to be much more involved than I had originally thought. Each of the studies in this article could comprise an article in and of themselves. But I think the key takeaway from all of the studies is this:

If your customers are making a rational decisions, give them as much information as possible upfront. If your customers are making emotional decisions, allow them to be as surprised as possible with the outcome of the purchase.

One thing that is worth noting is that advertisers often send mixed messaging to consumers that confuses them as to whether or not they are making an emotional or a rational decision. For example, automotive advertisements often show cars tightly rounding corners on country roads (emotional driver) while MPG statics flash on the screen (rational driver). Based on this article, my advice is to pick one angle. Go for the heart or go for the mind. But, at least within the same advertisement, don’t go for both.

Free gifts are powerful incentives for purchases. But how they are used should be determined by whether the customer is primarily using her heart or her mind in making the purchase.

Questions for Future Research

  1. What would the results of the studies be if customers didn’t even know which free gifts they would potentially receive? What if they didn’t even know what the alternatives were?
  2. Does the decision to purchase a product for work being a cognitive decision depend on the culture of the workplace?
  3. Is there any effect of income level on the preferences for certainty or uncertainty in receiving free gifts?
  4. Is there any correlation between the preferences of certainty or uncertainty in receiving free gifts and the relationship of the free gift to the item that is being purchased? In other words, do the results vary when the free gifts have nothing to do with what the customers are buying?

Featured image courtesy of sindesign licensed via Creative Commons.

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About Douglas E Rice

Douglas E Rice is just a guy who likes to learn stuff.
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