"Buy one get one free": a clichéd promotional tactic that works time and again to attract customers

Is the “buy one get one free” promotion in retail stores a profit or a loss for the merchants?

1. What problem do gifts solve?

Many purchasing decisions are made up of more than just one component.

For example, when you buy something online, you need to pay for shipping. When buying a brush, you also need to buy paper. At this time, consumers will consider the issue from two aspects. One is to integrate the products together to consider whether it is worth spending so much money. The other is to separate each product and calculate it. The problem with this is that the consumer has two opportunities to refuse to purchase the product.

The solution lies in gifting.

“By removing a decision-making process, adding free extras to your product, or including them in the base price of your product, you can make your product more accessible to your customers.”

For example, when we shop online, we often see free shipping offers for purchases over 38 yuan, which is the application of this method. In this process, consumers no longer need to consider whether to pay shipping costs and the goods to purchase, but instead focus on the question of which goods they want to buy. Reduces the chances of consumers saying no to our offers.

From this perspective, gifts are meant to reduce the difficulty and frequency of consumers’ purchasing decisions.

2. Why is the buy-one-get-one-free promotion so successful when consumers don’t have to make a decision twice?

The downside to freebies is that, for many consumers, the free extras don’t add much to the perceived value of the product. Therefore, it may not help you raise prices in front of consumers. On the contrary, it may eventually be given away to consumers for free along with your main products and services. To overcome this shortcoming, you should find some free gifts to offer to customers that have a lower cost loss on each transaction. This means you may need to give away something that has little to no direct cost.

So how do you increase perceived value?

That's buy one get one free.

Let's talk about the buy one get one free situations:

The first type is that the consumer originally wants to buy product A, but sees that there is a buy one get one free offer for product A. At this time, the free product A becomes the consumer’s main benefit. At this time, the free gift is the value that the consumer values. At this time, the consumer will gladly accept the product and feel that he or she has benefited. But the problem is that this consumer intends to buy product A, so the merchant will still make a profit even if there is no buy-one-get-one-free promotion. In this case, the merchant actually loses the cost of gift A.

The second type is that the consumer does not originally plan to buy product A, but only plans to buy a similar product. For example, the product A is on a buy one get one free promotion. The consumer originally planned to buy Coke, but saw that product A is on a buy one get one free promotion. At this time, there are two types of consumer purchase situations. One is that there are companions with him or he plans to buy drinks for his companions, in which case he is very likely to choose the buy one get one free green tea. In the other case, if he buys alone and can only drink one bottle, the consumer will rationally choose Coke. Of course, he will generally take an extra bottle.

The third situation is that the consumer originally did not intend to buy this type of product, but saw that there was a promotion going on and wanted to buy it. But the premise of this is that consumers still have demand for such products and that the prices of such products are not high.

The value of buy one get one free is that it increases consumers' perceived value of the gift and attracts consumers in the latter two situations mentioned above to participate.

In "Freakonomics" it is said:

"The real allure of free is tied to this fear. We don't have an obvious loss if we choose a free item. But if the item we choose is not free, there is a risk that we may make a wrong decision and suffer a loss. So, if we are given a choice, we try to look for free."

Therefore, we will pay attention to activities with free gifts. Such activities have been used and tried again by merchants, resulting in buy one get one free scams. For example, buy a piece of clothing and get a pair of socks for free. This deceives consumers and ultimately harms the merchants themselves, and later consumers become skeptical about buy one get one free.

But even so, based on their loss-averse nature, consumers will still pay when merchants offer a buy one get one free deal.

To sum up, when the purpose of sales is to reduce the number and difficulty of decision-making for consumers, low-cost gifts can be used as a promotional tool. When the purpose is to increase consumers' perceived value of the product, buy one get one free for the same product is feasible.

3. For the same product, if the merchant offers buy one get one free or two at 50% off, which option is better?

The problem with buy one get one free is that all consumers know that the value of the gift will never be higher than the product we purchased. When the buy one get one free gift is equal to the main benefit we are interested in, it actually lowers our valuation of the product. So when we don’t want to lower the value of the product in the minds of consumers, but want them to feel that it is a very good deal, a 50% discount on two items becomes the best option.

To go a step further, while doing promotion, tell consumers how much money they can save by buying two items at 50% off.

Another benefit of doing this is cost savings. From a financial perspective, the gift in a buy one get one free offer is considered a sale and taxed at the sales price. However, if it is 2 pieces at half the price, it is considered a discounted sale and taxed at the discounted price. In other words, if you buy two items at a 50% discount, you will pay less tax. It is even more effective in the cosmetics and clothing industries with higher gross profit margins. Taxes vary depending on the product, and convenience stores charge anywhere from 0-17% tax. If only one convenience store does this, the savings will be limited. If multiple chain stores do this, the amount will not be small.

Some people say that different strategies can be used for different products, and buy one get one free or two at 50% off are not necessarily promotional methods. I completely agree. There are many different ways to market , and they change with technology, the market and other factors. We should never limit ourselves to a single marketing method, but insights into consumer behavior and needs are a topic that can always be discussed.