Freebies devalue your internet business

Internet marketers will often tell you that you have to give away bonus products to help sell items. Indeed as you trawl across the web looking for information it seems as though there is some kind of competition on between marketers to see just how many “bonus” products they can stuff into a package.

Giving away bonus products actually devalues your business

Giving away bonus products actually devalues your business

The theory is that people will go “Wow – what value. I only pay for one thing and get all this lot for nowt.” Nice theory. Trouble is, it is false. New evidence published in this month’s Journal of Consumer Research confirms earlier work on the psychology of choice that bonus products actually work against you.

Previous research has shown that adding bonus products on the basis of “buy this – and get all this free as well” actually doesn’t make you feel as though you are gaining anything. Now this new study adds to the weight of evidence against bonuses by showing that if you do provide free items people devalue the items when they are later sold separately.

For example, let’s say you sell a training course with “free” books that are worth £150, you say. If a person decides not to buy the training course, but quite fancies the idea of the books, they are not prepared to pay the £150 because you have devalued them by giving them away free. The researchers at the University of Southern California have shown that bonus items or free products cannot be sold for their intended separate price later on because the purchasers have already mentally devalued them – “If you were prepared to give them away free they can’t be worth as much as you claimed” is the kind of thought process going on.

It suggests that the popular “buy one, get one free” campaigns in supermarkets have a long-term hit on profitability. It is great for short-term cash flow, but when the promotion is over consumers won’t pay the individual prices again because they have mentally devalued the single product. And so it is true online. If you sell a product but give away a “bonus” you devalue that bonus for future sales.

Indeed, all you have to do is take a look at several supposedly “expert” Internet marketing web sites and see the long list of bonus items that you can get free of charge. Wow! Now, how much do you value those bonus items for? How much would you be prepared to actually pay for them? Probably, not a lot.

It is true that bonus items do appear to help clinch a sale in a wavering mind. It is true, therefore, that bonus items can help turnover. But it is also true that businesses in it for the long term need to focus on profitability and this new research confirms earlier studies that giving stuff away as a free bonus actually works against you. It potentially devalues your entire business.

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