Today’s post is from Douglas Goldstein, the host of the Goldstein on Gelt Show, as well as the author of Rich as a King. Please give a warm EOD nation welcome to Douglas!
When you go shopping and you see a sign saying, “1+1 Buy one and get one free!” what do you do?
Many consumers don’t stop to ask themselves if they need or want this product. The satisfaction that they gain from getting “the other one free” compels them to take up this seemingly generous offer even if they don’t need both of the items in question.
But what pushes people towards free offers, making the freebie one of the most effective marketing tools? Is a special offer ever worth it?
What’s in it?
When a store or a business offers you something for free, you can be assured that altruism isn’t the main motive. It is up to you, the consumer, to figure out the company’s ultimate goal and find out if you’re really coming out ahead.
No matter how tempting “buy one and get one free” sounds, remember that you never get something for nothing.
This is true in the store: if you accept that special offer for a free iPhone when you sign a cell phone contract, will you have to commit to other expensive services at the same time?
This is true in chess: if you see that you can gain a free queen in a chess game, examine what the new position will look like after you take the piece. Will the capture open a pathway for your opponent to strike you later?
And this is true in life overall: while many people are genuinely kind hearted, be wary of accepting help from someone who has suspicious ulterior motives.
Why ‘Free’ Motivates
Turning down a free offer defies human nature. As behavioral psychologist Professor Dan Ariely wrote in his best-selling book, Predictably Irrational, “We often pay too much when we pay nothing.” In his studies, he showed that the possibility of getting something for free overwhelms a person’s rational thinking so that a company well-versed in utilizing freebies in its selling campaign can conquer a market. Ariely tested how individuals react to a free offer, showing that the almost hypnotic effect of paying nothing will cause people to make the most illogical decisions. He ran a study in a mall in Boston offering two choices: either receive a free $10 Amazon gift certificate or pay $7 for a $20 gift certificate. Irrationally, most people chose the free gift certificate. Whereas they could have profited by $13 (the value of the $20 gift certificate minus the $7 cost), they instead selected the $10 free one.
Keep Your Eyes Open
Next time you’re about to accept something for free, analyze the other side’s selflessness. If you can’t figure out their motivation, then don’t accept the offer. If you do succeed in discerning their motivation for giving you a freebie, then you’ve calculated the actual cost of the “free” item. Are you willing to pay that amount?
Douglas Goldstein is both a CFP® and an avid chess player. He and Grandmaster & World Chess Champion Susan Polgar are co-authors of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing. Available for sale online as well as at www.richasaking.com. Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, SIFMA, FSI.