For me, Jos. A. Bank has always been the poster child for price discounting. It’s been highlighted before here and here. Usually their specials involve buying one suit at full price, and then receiving shirts, ties, even additional suits for free. You can say what you want about their pricing strategy, but clearly they recognize the power of FREE. So imagine my surprise this morning when I saw this ad in my inbox: “Buy 1, Get 2 Suits for $4 – Plus EXTRA 30% OFF ALL Clearance Dress Shirts & Sportshirts!”
If you’re going to give away two suits for $4, why not just give them away for free? Four dollars is negligible in terms of revenue to Jos. A. Bank, but for consumers, the difference between $4 and FREE is huge. As we’ve come to see many times, no word is more powerful than FREE when it comes to driving human behavior.
I’m reminded of a story by author Dan Ariely where in his book Predictably Irrational, he recounts what happened in the late 1990s when Amazon.com began to offer free shipping on orders over a certain amount – in this case, $31.90. So if you purchased a single book for say, $17.99, then you paid $3.99 for shipping. But if you increased the order to $31.90 or above, then the shipping on the entire order was free.
When the policy was rolled out worldwide, sales increased dramatically. It seemed that there were a whole lot of people all over the world who were willing to pay for the cost of an extra book just to take advantage of the free shipping deal. While the folks at Amazon were pleased over the result, they noticed that in France, (and only in France) there was no increase in sales. So why were the French so different from the rest of the world with regards to this offer? According to Ariely, it turns out that the French were reacting to a slightly different deal.
Instead of offering FREE shipping on orders over a certain amount, the French division priced the shipping for those orders at one franc. Just one franc–about 20 cents. This doesn’t seem very different from FREE, but it was. When Amazon changed the promotion in France to include free shipping, France joined all the other countries in a dramatic sales increase. In other words, whereas shipping for one franc–a real bargain–was virtually ignored by the French, FREE shipping caused an enthusiastic response.
My hope here is that Jos. A. Bank is conducting A/ B split testing where half of their customers are being offered the “two suits for $4” deal while the other half are being offered “two suits for FREE”. If so, I’d be willing to bet that the response for their “two suits for FREE” offer overwhelms the four-dollar deal. Jos. A. Bank – please tell me you’re doing this.
Here’s the takeaway: “FREE” is perhaps the most powerful word for consumers. When faced with choices where one is free, they often overreact to the free one. If you have to discount, think about the power of FREE and how it affects human behavior.
