I’ve often wondered why gift bags are handed out at even the most lavish Hollywood parties and benefits. Surely the movie stars in attendance can’t be that impressed with the cosmetics, perfume and other designer items in the bags. After all, they could buy themselves those items anytime they wanted.
Well, turns out I wasn’t the only one wondering. While I was pondering this question over an issue of People magazine at the doctor’s office, researchers in Australia and in Maryland were getting to the bottom of it with a joint study of how consumers perceive value.
In a report titled “When do consumers think a freebie is more valuable than a discounted product?” the two explain that customers are likely to value a gift more than a deeply discounted promotional item. That’s especially true if the gift comes from a prestigious brand, found Mauricio M. Palmeira, of Monash University in Melbourne, and Joydeep Srivastava, of the University of Maryland. Their article was published in the Journal of Consumer Research.
This theory has long animated cosmetics companies, which for years have been handing out bonus products or gifts along with purchases. A formal test of Palmeira and Srivastava’s hypothesis used spaghetti. All the participants in the study were purchasing a jar of organic tomato paste for $8.95. Half of the participants were given a free box of spaghetti, and the other half were offered the same box of spaghetti at a discount. They were then asked how much they’d be willing to pay for the spaghetti if they weren’t getting it as part of the deal.
The people who had been offered free spaghetti were willing to pay an average of $2.95 for it, but the people offered the spaghetti for 50 cents were willing to pay an average of only $1.83 for it, Palmeira and Srivastava reported.
Their conclusion: When a free product is paired with an expensive product, consumers feel it’s worth more than the same product offered at a low price.
The idea, of course, is that if we savvy consumers are offered something of value at a very low price, we’ll wonder what’s wrong with it. But if a free item is paired with something that we know has some value, we’ll assume that it, too, has value.
That means even if you’re just a one-pound bag of vermicelli, you’re still judged by the company you keep.
Or, as Palmeira and Srivastava put it, “If Mercedes-Benz promotes a car with a free GPS system, we expect the GPS to be high quality.”
Or, as smart marketers already knew, everybody loves a freebie.
Anne Wallace Allen is managing editor of the Idaho Business Review.