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The Power of Free
An interesting study mentioned in a recent New York Times article shows that, while most people like getting a deal, everybody loves free stuff. In the experiment, two tables were set up offering discounted chocolates: Lindor truffles for 15 cents and Hershey's Kisses for 1 cent. At this price, the Lindor truffles were chosen about 70% of the time. This would seem to make sense because the truffles are ostensibly a lot tastier and a great value at 15 cents.
Then, they dropped the price by one penny for each, and free Hershey's Kisses were chosen almost 70% of the time. This was true even when the tables were set up at the end of a cafeteria line and the 14 cent truffles could easily be added to the price of the meal.
The moral of the story? Cheap is good, but free is great!
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Company Snapshot
ePromos Promotional Products
Year Founded: 1998
Employees: 75
2007 Revenue: $25,003,000
222 East 44th St
10th Floor, New York, 10017
P. 1 212-457-3905
http://www.epromos.com
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October 9th, 2008 5:24 pm | Daniel Laury
Couldn't agree more. We've tested price elasticity at my prior company, an airport equipment business, and there wouldn't be significant differences between pricing one of our consumer products at $2, $5 or $7 a piece, while we recorded a huge increase during a free test experiment.