MC Design & Services, LLC
616-881-3753
  • Home
    • About MCD&S
    • Testimonials
  • Contact Us
  • Design
    • Terms of Service
  • Services
  • Social Media Help
  • Marketing Help
  • Blog

The Psychology Behind FREE – Has Social Media Created A Problem?

2/16/2013

0 Comments

 
Picture
There is a trend I have noticed emerging from social media for service businesses: we are giving too much information away for free. We lull ourselves into giving away services and expertise that we should be charging for. Before we know it, no one wants to pay for what we have to offer.

Does this sound familiar? You try to gain attention to your business by running a smart campaign where you offer  a sampling of your service for free - maybe it’s a free consultation or download - and the people who take you up on your offer enjoy it, but never come back for the paid service. Why?

Maybe they have gone on to someone similar to you for another free sampling? Maybe they feel they got exactly what they needed from the initial free service.

Maybe people have now come to expect to get something for nothing.

There is psychology involved in this. You have heard the saying “you get what you pay for”? What do you think people perceive they are getting when it is free? I think most of us assume that something that costs more must be worth more – we attribute expertise we may not even know about to the person who is charging higher than the other.   This is a psychological effect called prestige pricing, which points to a strong correlation between perceived product quality and price. The higher the price the more likely customers are to perceive it has higher quality compared to a lower-priced product. According to psychologist Dr. Peter Shallard, “Being expensive cultivates an aura of expert and elite status”… “setting your price is the psychological equivalent of setting the value of YOU. Your life, your work, that thing you’ve poured your energy and soul into.” He recommends you ask customers who don’t want to pay your set value what they are comparing your price to; you and they may find it is not apples to apples. When Shallard first asked this question he found out his life-changing services were being compared to piano lessons!
Doing a study on cognitive biases can be very enlightening for an entrepreneur.
But with a tough economy people have been forced to settle for less and to become used to it. And maybe we have convinced ourselves we are worth less in the process. So if you are going to offer something for free or discounted, what should you do?

  • Always include the numerical value in your offer.

  • Always include the time value in your offer - i.e., the actual time the service will take (example: a thirty-minute consultation for $30). According to a study from the Stanford Graduate School of Business, marketing time sells better than marketing money because our relationship with time is much more personal than our relationship with money.

  • Make them pay a little. With even a small “buy in” made on the customer’s part, a psychological commitment is made. There will be a tendency to continue with the service because they are already invested and don’t want to feel they have lost that initial $5.00. This is known as loss aversion - studies suggest that losses are twice as powerful, psychologically, as gains.

  • Make them pay more than a little, but include the original price. According to research by cognitive and mathematical psychologist Amos Tversky and Psychologist Daniel Kahneman, who also were the pioneers in proving loss aversion, creating an anchoring bias has a very strong psychological effect (the anchor being the original price in this example). If consumers are unsure about the price they will look around for comparative prices – you provide them with the price to compare with.

  • Offer coupons. Your potential customers will feel they are getting a deal and you still get paid. Again, include monetary and time values in your offer.

  • Social media posts that show you are well versed in your field – statistics, what famous people say about it/quotes, questions that get people thinking about their need for your service. Do NOT give away your service in bite-sized portions.

If you don't want to believe the psychologists, why not listen to conventional wisdom? This is just one more example of my belief that SEO and Online Marketing rules are like dating ... what is it your mother always told you about why buy the cow and giving away its milk?

Is this just a social media problem?
Was this caused by social media and or the economy?
What are your thoughts?

Picture
Here are some other good links regarding this subject:
http://www.princeton.edu/~kahneman/docs/Publications/Anomalies_DK_JLK_RHT_1991.pdf

http://www.gsb.stanford.edu/news/research/aaker_time.html

http://biz.aalto.fi/en/current/news/view/2012-10-25/

http://www.petershallard.com/

http://www.shopify.com/blog/6563013-using-behavioral-economics-psychology-and-neuroeconomics-to-maximize-sales#axzz2L66MFRKR

0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Rebecca LeClaire
    Rebecca LeClaire
    ABOUT THE AUTHOR
    The Internet Rules
    Picture
    Drawing A Blank?
    SEO Couch
    The Social Media Doctor
    Is In

    The Personal MBA

    Archives

    May 2014
    September 2013
    May 2013
    April 2013
    March 2013
    February 2013
    January 2013
    November 2012
    October 2012
    August 2012
    July 2012
    June 2012
    May 2012
    April 2012
    March 2012
    February 2012
    December 2011
    October 2011
    June 2011
    February 2011
    December 2010
    October 2010
    July 2010
    June 2010
    May 2010
    December 2009
    September 2009
    August 2009
    July 2009


    Free System Checkup


    Download A FREE 30 Day Trial Of VIPRE Antivirus
    My Recommended AntiVirus
    For Windows Users.
    There Is Nothing Better.
    I Personally
    Saved My Computer
    Using This Tool.
    I Use Nothing Else!

    Categories

    All
    Add Contacts To Facebook
    Addthis.com
    Adwords
    Affiliate Programs
    Affordable Affiliate Software
    American Express
    Anchoring Bias
    Benefits Of Email Marketing
    Benefits Of Having Your Own Affiliate Program
    Blue
    Bonus Offers
    Business Funding
    Business Listings
    Business Resources
    Canadian Anti-Spam Law
    Carol Kane
    Characteristics Of An Entrepreneur
    Christmas Catalog 2010
    Clean Website
    Cognitive Bias
    Confidence
    Contest
    Coupons
    Custom Illustrations
    Custom Navigation
    Driving
    Ebook
    Ecommerce
    Email Marketing
    Entrepreneurs
    E-Retail
    Facebook
    Facebook Business Page
    Facebook Tips
    Fake Anti-virus
    Family Humor
    Find Your Inner Goddess
    Follow
    Follow Back
    Getting Kids To Eat
    Google
    Green
    Grey
    Guide To Email Marketing
    Hashtag
    Holiday Donations
    How To Add Share Buttons To Any Website
    Humor
    Humperdink
    Hyperlinks
    Internet Marketing
    Is Email Marketing Effective
    Is Social Media Creating A Problem For Business
    Kahneman
    Kid Humor
    Leftovers
    Linkedin
    Listing
    Logo Design
    Loss Aversion
    Marketing
    Online Consumer
    Online Marketing
    Online Store
    Panda
    Parenting
    Parisisms
    Perceived Value
    Poverty
    Princeton
    Privacy Policy
    Psychology
    Psychology Of Discounts
    Psychology Of Free
    Rainy Day Activities
    Rebecca Leclaire
    Rebecca Leclaire Marketing
    Rules Of Online Marketing
    Rules Of Seo
    Scam Alert
    Scams
    School Closings
    Search Engine Marketing
    Search Engine Optimization
    Seizures
    Sem
    Seo Humor
    Seo Jokes
    Seo Scams
    Shallard
    Social Media
    Social Media Marketing
    Social Networks
    Stanford Graduate School Of Business
    Start A Small Business
    Studies
    Summer Survival
    Summer Vacation Survival
    The Princess Bride
    Tversky
    Twitter
    Twitter Limits
    Virtual Assistant
    Viruses
    Website
    Website Design
    What To Charge
    When To Send An Email
    White Background
    Whois
    Woman Owned Businesses
    Work At Home Mom
    Work At Home Survival
    Yard Sale


MCD&S
About MCD&S
Contact Us
Testimonials
Design
Services
Calendar Login
Terms Of Service
Social Media Help
Start-up Help

Online Marketing Help
Blog
Business Builder
Design Firm Help
​
Privacy Policy

Copyright © 2009 - 2018 MC Design & Services, LLC. All Rights Reserved.
Photos used under Creative Commons from Ambernectar 13, Tim Green aka atoach