Today we venture deep into the minds of our customers to answer the age-old, controversial marketing question: does offering a “free gift with purchase” actually do anything?
Spoiler alert: yes, it does… but it doesn’t have the effect that you may expect.
Using case studies and scientific research, let’s look at the psychological effects of the free gift with purchase (GWP) to determine if it’s right for your business, or if there are more effective promotional campaigns.
The “Free Gift With Purchase” Effect
First, why do companies provide a free gift with purchase? What are they trying to achieve?
Online retailers that offer a free gift with purchase (GWP), which is less than 50% of companies, believe that the added value of a free gift will inspire repeat purchases, increase brand loyalty, and stimulate social and word-of-mouth advertising. Companies that offer free GWP include:
Kinder (confectionary) — free toy
Eileen Fisher (apparel) — free organic ditty bag
Bentley (cologne) — free chrome Bentley key ring
These case studies have been reported by companies that specialize in creating customized GWP for their clients, but do the benefits hold up under scientific scrutiny?
Does GWP Have Scientific Backing?
The answer… yes, but not how you’d expect.
As retailers constantly innovate promotional offers to provide more value to their customers, the “two items for the price of one” sales method has been framed using two distinct promotional tactics: the free gift, and the bundle… and it turns out how you frame the exact same deal actually has different psychological effects on your consumers.
For example, if your business sells household supplies, your promotions could be either:
- “Buy a mop for $20, and get a bucket free!” — the free gift
- “Buy a mop AND bucket for $20!” — the bundle
Studies have shown that bundle offerings and free gift offerings tend to influence the perceived value of products themselves, rather than their opinions of the company offering the gift. Also, the promotional frame has an impact on product return rates!
Effects of Gift with Purchase
With a free gift promotion, the “free item” or “gift” is perceived as less valuable by the customer, while the focal item is valued more. Therefore, customers are less likely to buy the free item after the sale, but more likely to purchase the main item.
Of course, the likelihood of repurchase is directly related to how effective the gift promotion is in increasing the value of the main item, so if that value increases to surpass the customer’s intrinsic repurchase threshold, then they will buy again.
Additionally, with a free gift promotion, customers are less likely to return an item, because the perceived loss of giving back a “free” item is too high.
Effects of Bundle
In a bundle promotion, the opposite is true. The main item is perceived as less valuable, while the bundled item is valued more. Therefore, customers are less likely to purchase the main item as a single item, but the supplementary item is more likely to be purchased as a standalone
With a bundled promotion, customers do not mind returning an item included in a bundle.
TLDR; offer free gift promotion if you want to reduce return rates and sell more of the main product at the expense of the gifted product; offer a bundle if you want to sell more of the supplementary product at the cost of the main product.
The proven effects of “free gift with purchase” promotion are not proven to inspire net-increase in repeat purchases; rather, the promotion should be used to increase/decrease the perceived value of one focal item at the expense of a supplementary item. Also, the free gift promotion reduces actual return rates as well as the customer’s desire to return.
HOWEVER, these studies imply only the probability that customers purchase again, and this likelihood varies based on the personalization and relevance of the free gift and/or bundle.
That’s why there exists a vast amount of consumer data analysis tools and companies that make large profits off of customized gifts with purchase.
P.S. Children are the Future… of GWP
There does exist a customer group where the free gift with purchase has had immense, proven success: with products geared towards children.
You’re certainly familiar with the Happy Meal toy, which was so effective at marketing to children that McDonald’s was sued by a California mother in 2010 who claimed that the fast food chain used toys to unfairly attract children.
In the listed case study above, Kinder successfully offers a free child’s toy with purchase of chocolate, and there exist highly lucrative marketing teams like Kidoz that offer safe advertising and Gift With Purchase creation for children.
The positive results from a child-facing GWP campaign stem from two main factors:
- Children perceive a free gift as more valuable than adults
- Because adults are the ones delivering the gift to their child, the child’s joy adds to the value of the product for the parent
We’re not saying all GWP campaigns should be geared towards children, it’s just that these are the only ones with a proven record for having net-increases in repeat customers and word-of-mouth advertising (they’re lovin’ it).