Zero-price effect
‘Free’ is disproportionately more attractive than a very low price.
Four of the eight page areas.
Three ways to use it, and one to avoid.
- Offer free delivery or a free-delivery threshold rather than a small discount.
- Offer free returns or a free gift, especially on treat purchases.
- Check the margin first, as free delivery lifts orders and basket size but can cost more than it earns.
- Avoid: calling something free if the customer pays anything beyond the unavoidable cost of responding and delivery.
Free pulls harder than cost-benefit reasoning predicts, but free delivery isn’t always profitable.
Far more people chose an item once its price fell to zero than cost-benefit reasoning predicts.
Lab and cafeteria experiments found far more people chose an item once its price fell to zero than cost-benefit reasoning predicts. A later study found the effect stronger for pleasure products than practical ones. Online retailer data show shoppers are very sensitive to delivery fees, though free delivery offers were not always profitable. Fan and colleagues found a zero price lowered demand compared with a low price when hidden costs such as travel or effort were high.
Four sources, each checked.
Last reviewed
Only call something free if the customer pays nothing beyond the unavoidable cost of responding and delivery, as describing a product as free otherwise is a banned practice under the DMCC Act 2024 (Schedule 20). State any condition such as a minimum spend clearly.
This is simply a pointer to check, not legal advice. Seek legal advice before you put this principle into action.