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Free Offer ≠ Cheap Product

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Free Offer ≠ Cheap Product: A Selective Accessibility Account on the Valuation of Free Offers
Mauricio M. Palmeira, Joydeep Srivastava

Journal of Consumer Research
Volume 40, Number 4, December 2013
The University of Chicago Press

Many consumer price promotions (including new product launches) offer a product for free or for a low, discounted price along with a required purchase. Consumer willingness to pay for a product after a promotion is retracted is higher when it was offered for free than when it was offered at a low, discounted price. The underlying reasoning is that the price of the product on promotion is used as a natural anchor for value estimation. However, when the product is offered for free, consumers are less likely to consider the value of the product and are influenced by anchors such as the price of the focal purchase. In contrast to some prior findings, a free offer does not devalue the product at all and, at a minimum, devalues the product less than if it were offered for a low, discounted price.

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