Free Offer ≠ Cheap Product: A Selective Accessibility Account on the Valuation of Free Offers

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Free Offer ≠Cheap Product: A Selective Accessibility Account on the Valuation of Free OffersAuthor(s): Mauricio M. Palmeira and Joydeep SrivastavaSource: Journal of Consumer Research, (-Not available-), p. 000Published by: The University of Chicago PressStable URL: http://www.jstor.org/stable/10.1086/671565 .

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� 2013 by JOURNAL OF CONSUMER RESEARCH, Inc. ● Vol. 40 ● December 2013All rights reserved. 0093-5301/2013/4004-0004$10.00. DOI: 10.1086/671565

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Free Offer ( Cheap Product: A SelectiveAccessibility Account on the Valuation ofFree Offers

MAURICIO M. PALMEIRAJOYDEEP SRIVASTAVA

Many consumer price promotions (including new product launches) offer a productfor free or for a low, discounted price along with a required purchase. This researchdemonstrates that consumers’ willingness to pay for the product after the promotionis retracted is higher when it was offered for free than when it was offered at alow, discounted price. The underlying reasoning is that the price of the product onpromotion is used as a natural anchor for value estimation. However, when theproduct is offered for free (i.e., zero price), consumers are less likely to considerthe value of the product and are influenced by anchors such as the price of thefocal purchase. In contrast to some prior findings, a free offer does not devaluethe product at all and, at a minimum, devalues the product less than if it wereoffered for a low, discounted price.

Afairly common form of a consumer price promotionis when companies offer a product for free or for a

low, discounted price, along with a required purchase. Con-sider a jewelry store deciding whether to offer a specificring for free or for a low, discounted price of only $19 tocustomers who purchase a specific necklace for $100. Manynew product introductions also involve offering the newproduct sample either for free or for a low, discounted pricealong with the purchase of a similar product. Focusing onsuch promotional offers, this research examines the effectof temporary special prices on consumers’ willingness topay for the stand-alone product, once the promotional priceis retracted. For customers who purchase the necklace for$100 at the jewelry store, should the ring be offered on

Mauricio Palmeira ([email protected]) is senior lecturerof marketing, Monash University, Melbourne, Victoria, Australia 3145.Joydeep Srivastava ([email protected]) is Ralph J. Tyser Professorof Marketing and Consumer Psychology, Robert H. Smith School of Busi-ness, University of Maryland, College Park, MD 20742. This research wassupported by a research grant awarded to the first author by the Departmentof Marketing at Monash University and a summer research grant awardedto the second author by the Summer Research Committee, Robert H. SmithSchool of Business at the University of Maryland. The authors acknowl-edge helpful input from the editor, associate editor, and the reviewers.

Laura Peracchio served as editor and Rashmi Adaval served as associateeditor for this article.

Electronically published June 27, 2013

promotion for free or for a low price of, say, $19? Howwill the promotional price affect consumers’ product val-uation? The present research addresses these issues.

Although “conditional promotions” (which offer consum-ers a “supplementary” product for free, or for a low, dis-counted price with the purchase of a “focal” product, or forspending a specific amount) are primarily aimed at boostingshort-term sales, such promotions may have unintended con-sequences as well (Neslin 2002). Indeed, examining con-ditional promotions where the supplementary product is of-fered for free, Raghubir (2004) proposed a value-discountinghypothesis, which suggests that the extent to which consumersinfer that the cost of the free product is low, their willingnessto pay for it as a stand-alone product is likely to be low oncethe promotion is retracted. Consistent with a common beliefthat people do not value what they do not pay for, Kamins,Folkes, and Fedorikhin (2009) also found that a free pro-motion offer lowered the price that consumers were willingto pay for both the focal and supplementary products. Incontrast to the inferential account, which suggests that offer-ing a product for free devalues it (e.g., Raghubir 2004), priorresearch also suggests that consumers tend to overreact pos-itively to free offers. Free offers are associated with morepositive effect (Shampanier, Mazar, and Ariely 2007) anddraw more attention, distracting from other negative attributes(Chandran and Morwitz 2006). Given the somewhat conflict-ing findings in the literature, this research examines how theprice of the product on promotion affects consumers’ productvaluation when the temporary price is retracted.


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000 JOURNAL OF CONSUMER RESEARCH


The present research thus extends the previous literaturein several ways. First, we review evidence for the devalu-ation of free offers and propose that such promotions donot necessarily lead to devaluation. A free product is notnecessarily a cheap product. If a high-end car manufactureroffers a free global positioning system (GPS), one wouldexpect the quality of the GPS to be high. Similarly, if ahigh-end jeweller gives away a free bottle of wine to theircustomers with a specific purchase, we would not expect itto be a cheap wine. In other words, the value of a supple-mentary free product is likely to be commensurate with thevalue of the focal product.

Second, we examine conditional price promotions in whichthe supplementary product is offered at a discounted, non-zero price. At first glance, one may argue that the value-discounting hypothesis (Raghubir 2004) suggests that theprice that consumers would be willing to pay for a supple-mentary product when offered as a stand-alone productshould be lower when it is offered for free than when it isoffered at a low, discounted price during promotion. Further,the impact of the price of the focal product should hold forzero (free) and nonzero (discounted) offers, with zero beingat the extreme of a continuum. However, we argue that aprice promotion offering a product for free is qualitativelydifferent than offering it at a discounted price. Across arange of price promotion contexts, we demonstrate that theprice consumers are willing to pay for a product after thepromotion is retracted is higher when it is offered for freethan when it is offered at a low, discounted price. In otherwords, in terms of product valuation and price expectations,a free promotion is more beneficial for a marketer thanoffering a product at a discounted price in the long term.

We propose that consumers’ mental process of estimatingproduct value is described by the well-documented anchor-ing effect whereby an externally provided anchor biasessubsequent numerical judgments (Tversky and Kahneman1974). The underlying process is best represented by theselective accessibility model, which suggests that anchoringeffects are mediated by a selective increase in the accessibilityof anchor-consistent information (Strack and Mussweiler1997). We argue that the nature of the anchor used in es-timating product value differs depending on whether theproduct is promoted for free or a nonzero, low price. In theabsence of any price information about the supplementaryproduct, we predict that in estimating the value of a freeproduct, the price of the focal product serves as an anchor,making accessible thoughts and values that are commen-surate with the price of the focal product. In contrast, whenestimating the value of nonzero-priced products, the priceof the supplementary product is likely to be used as a naturalanchor in evaluating the deal in terms of savings with respectto the regular price of the product. Rather than just a changein value for a shift from low price to zero, we predict thatlowering the promotion price to zero actually increases prod-uct valuation. The implication is that offers with low pricesmay lead to more devaluation, whereas a free offer may notlead to any devaluation at all.

The article is organized as follows. The next section re-views the relevant literature on price promotions and freeoffers and provides the conceptual background for the pre-dictions. The results of five studies are then reported thatprovide converging evidence for the predictions across dif-ferent promotion contexts and price levels. Together, thefindings suggest that free offers are a special type of pro-motion in that the value of the supplementary product isnot affected by its price on promotion (free or $0). Rather,consumers are affected by other anchors, such as the priceof the focal product. In contrast, the value of a supplemen-tary product promoted for a nonzero price is influenced byits price on promotion and is less influenced by other anchorssuch as the price of the focal product. The article concludeswith a discussion of the findings and their managerial im-plications.

CONCEPTUAL BACKGROUND

Do Free Offers Lead to Devaluation?

In the context of a free offer promotion along with apurchase, Raghubir (2004) argues for a process where con-sumers infer that the focal product has a high margin tocover the cost of the free supplementary product, or thelatter is a low-cost product, or both. This inferential processleads to the value-discounting hypothesis, which suggeststhat the lower the price of the supplementary product onpromotion, the lower the price consumers would be willingto pay for it, as well as for the focal product, when thepromotion is retracted. Raghubir (2004) reported that will-ingness to pay for the free supplementary product was lowerwhen the focal product price was low. Similarly, Kamins etal. (2009) reported that the price consumers were willing topay for a stand-alone focal product was lower when a sup-plementary product was described as free, relative to whenthere was no mention of free in a promotion. They proposethat individuals use a numerical or an inferential system tojudge value. When the task is easy, such as in the valuationof a single product, consumers use the inferential system,which is more deliberate. In contrast, when a task is difficult,such as stating willingness to pay for a bundle of two dis-parate products, consumers tend to simplify, relying on thenumerical system, which is less effortful than the inferentialsystem. This reduces the willingness to pay for each com-ponent but not of the bundle.

Another stream of research examines consumer prefer-ences on receiving a free offer. Although this research doesnot directly examine product valuation, it shows that con-sumers tend to overreact to free offers relative to low prices.For example, Chandran and Morwitz (2006) reasoned thatfree shipping would have a greater impact on the evaluationof an offer than a discount of equal value because a freepromotion would distract people from other considerations.In one study, they reported that participants focused so muchon the free component (shipping) that they were unaffectedby information regarding product quality. Further, Sham-panier et al. (2007) proposed that decisions about free rel-



PALMEIRA AND SRIVASTAVA 000


ative to low-priced products differ in that people perceivethe benefits associated with the free products as higher. Ina choice task involving candies, they showed that demandfor the cheaper candy was similar when it was 2¢ or 1¢,but there was a dramatic increase when it was free. Theyshowed that free offers are often associated with more pos-itive effect than other offers.

Taken together, previous research suggests that while afree offer may generate a disproportionate amount of ex-citement among consumers at the time of the promotion(Chandran and Morwitz 2006; Shampanier et al. 2007), aninferential process may lead to product devaluation once thepromotion is retracted (Kamins et al. 2009; Raghubir 2004).Although the willingness to pay measures product valuationonce the promotion is retracted, the devaluation itself occursat the time of the promotion. Due to the somewhat conflict-ing implications, this research examines the contextual in-fluence of price information on product valuation as a func-tion of whether the product is offered for free or for a low,discounted price, along with a focal product purchase.

Use of Different Price Anchors in EstimatingWillingness to Pay

Consistent with the recent literature on the contextualinfluence of price on willingness to pay (e.g., Adaval andWyer 2011), we propose an anchoring process to describehow consumers estimate their willingness to pay for thesupplementary product. In the context of a conditional pro-motion where the price of the supplementary product aswell as the focal product are present, consumers are likelyto use the promotional price of the supplementary productas an anchor as it is the most accessible and relevant in-formation for the estimation task. However, when the sup-plementary product is offered for free, the price of the focalproduct is likely to be used as an anchor to estimate will-ingness to pay for the supplementary product. We thus pro-pose the use of different price anchors in estimating thewillingness to pay for the supplementary product dependingon whether it is offered on promotion for free or for a low,discounted price.

In reviewing the conceptual underpinnings of price an-choring effects, Adaval and Wyer (2011) note that priceanchors not only provide a reference against which a newprice is evaluated but also activate thoughts that are con-sistent with the anchor (Strack and Mussweiler 1997; Tverskyand Kahneman 1974). Specifically, Strack and Mussweiler’s(1997) selective accessibility model suggests that an anchoracts as a semantic prime, making individuals think aboutfeatures of the target consistent with the anchor value. Theselective accessibility process is akin to numeric primingand has been shown to have a significant impact even whenthe anchor and the target are unrelated (Nunes and Boat-wright 2004; Wong and Kwong 2000). For example, Nunesand Boatwright (2004) reported that consumers were willingto pay $9 for a CD after incidentally being exposed to asign indicating that sweatshirts were being sold for $80. The

willingness to pay for the CD decreased to $7.29 when thesweatshirt sign indicated a price of $10. Although someresearch suggests that for price anchoring effects to occur,the anchor and target should be related (Krishna et al. 2006),Adaval and Wyer (2011) recently demonstrated that priceanchoring effects occur for related products only if the priceanchor is deliberated upon. In the absence of any deliber-ation, price anchoring effects occur across a related as wellas an unrelated anchor and target. In the context of condi-tional promotions examined in this research, the focal prod-uct and the supplementary product are often related (or atleast commensurate). Building on the previous literature(Adaval and Wyer 2011; Strack and Mussweiler 1997), weargue that the selective accessibility of different prices dueto different price anchors best captures consumers’ numer-ical judgments of product value depending on whether thesupplementary product was offered on promotion for freeor for a low, discounted price.

Consider a free offer promotion. A free product is notnecessarily a cheap, low-quality product. Firms often giveaway free gifts with the purchase of expensive items. In thiscase, the free product also tends to be of high quality andrelatively expensive in its category. If an airline gives awaya free bottle of wine to their first-class customers, we wouldexpect the price and quality of the wine to be commensuratewith the price of a first-class ticket. Estimates of value ofthe wine would not be affected by the fact that it was offeredfor free (or $0) but rather by the price of the first-classticket. The reasoning is that the price of the first-class ticketwould prime an expensive concept, making high prices moreaccessible (Strack and Mussweiler 1997). In the absence ofany price information about the wine, the ticket price servesas an anchor when consumers are asked to judge the valueof the wine. If the anchor is high enough, there should beno devaluation of the supplementary product.

Raghubir (2004) reported that willingness to pay for thefree product was influenced by the price of the focal product.While interpreted as evidence that free offers devalue thesupplementary product, in the absence of a control conditionwhere there is no price information, it cannot be ascertainedwhether a free offer indeed devalued the supplementary prod-uct. Although value discounting suggests that a free offerwould devalue a product relative to a control condition, theselective accessibility model suggests that it would not, asthe judgment is affected by the focal product price ratherthan by inferences about why a free product is being offered.

Now consider a promotion where a product is offered fora low, discounted price. Although research on conditionalpromotions has not examined differences between promo-tions with free and low prices for the supplementary product,research across several domains suggests that zero is per-ceived and treated in a qualitatively different manner thannonzero numbers, often causing a discontinuity in the tran-sition from small numbers to zero (Kahneman and Tversky1979; Palmeira 2011; Shampanier et al. 2007). In estimatingwillingness to pay for a supplementary product that is of-fered for a low, discounted price on promotion, the low





price of the product itself is most accessible and relevantand thus serves as a natural anchor. As such, we argue thatthe anchor that is used in estimating product value shiftsfrom the price of the focal product, when the supplementaryproduct is offered for free, to the price of the supplementaryproduct itself, when it is offered at a low, discounted price.The change in the anchor used in estimating product valueleads to an interesting effect, whereby a nonzero, low pricedevalues the supplementary product more than a free offer.

Summary of Predictions

We argue that the price anchor used in estimating productvalue after the promotion is retracted changes depending onwhether the product was offered for free or for a low, dis-counted price. While the price of the focal product servesas an anchor when the supplementary product is offered forfree, the price of the supplementary product itself serves asa natural anchor when it is offered for a low, discountedprice. The selective accessibility due to the different priceanchors leads to several predictions. First, we expect thewillingness to pay for the supplementary product to be sim-ilar when it is offered for free relative to a control conditionwhere there is no price information. In both cases, we expectwillingness to pay to be affected by the price of the focalproduct which serves as the anchor. In contrast, when thesupplementary product is offered on promotion for a low,discounted price, willingness to pay should not vary withthe price of the focal product since the price of the supple-mentary product itself serves as a natural anchor rather thanthe focal product price.

Second, we predict that a free offer will be valued morethan an offer of a low, discounted price, because the priceanchor (i.e., focal product price) will be higher than thenatural anchor (i.e., price of the supplementary product).The second prediction implies that consumer reactions willbe more positive for free offers than for low, discountedoffers. Given that previous research has shown that offeringsomething for free induces more positive effect than a non-zero, low price (Shampanier et al. 2007), one could poten-tially argue that free offers elicit a feeling of reciprocationtoward the marketer, which in turn increases the value offree offers. It is thus important to highlight the nuanceddifferences between the current research and previous re-search. First, the current research examines judgments ofvalue after the promotion and not choice during the pro-motion. As such, while Shampanier et al. (2007) examinedthe value of the promotion, we examine product valuation.Given that the value of the promotion increases as the pricedecreases, it is not surprising that Shampanier et al. (2007)reported that choice increases substantially as the price goesfrom nonzero to zero. In contrast, we argue that the valueof the product decreases as its price decreases but then in-creases as it transitions to zero. Said differently, not onlydo we propose and demonstrate a discontinuity, but we alsopredict a reversal in the relationship between the price ofthe supplementary product at promotion and willingness topay for the product after the promotion has been retracted.

Overview of Studies

Study 1 begins the investigation by demonstrating that con-sumers’ willingness to pay for a supplementary product afterthe promotion is retracted is higher when it is offered onpromotion for free than at a low, discounted price. Impor-tantly, study 1 shows that willingness to pay did not differacross the free offer and control condition where there wasno price information. Study 2 rules out several alternativeexplanations, namely, positive affect, feelings of recipro-cation caused by a free promotion, and meaningfulness ofthe promoted price. Study 3 attests to the robustness of thefindings by showing that the results replicate even when thesmallest possible price is used ($0.01) and regardless ofwhether the promotional price of the product is describedas free or $0.00. Studies 4a and 4b demonstrate that con-sumers’ willingness to pay for the stand-alone supplemen-tary product is more strongly influenced by the price of thefocal product when the supplementary product is offered onpromotion for free than at a low, discounted price. Study 5provides further evidence for the selective accessibility modelby showing that the effect of the focal product price on will-ingness to pay for the supplementary product when it is of-fered for free is attenuated by asking participants to considera different price anchor after the promotion.

STUDY 1

Study 1 examines the effect of the promotional price ofthe supplementary product on consumers’ willingness to payfor it as a stand-alone product, once the promotion is re-tracted.

Method

One hundred twenty-five Australian residents between theages of 20 and 30, recruited through an online panel com-pany, took part in a single factor between-subjects designwith four levels (promotion: control vs. free vs. $0.50 vs.$2). Participants saw an ad for a large pizza and bread sticksfrom a pizzeria (Papa John’s). In the control condition, thead read “Buy a large meat lover’s pizza for $15 . . . anddon’t forget to check out our side of 6 bread sticks!” In theother three conditions, bread sticks were offered for free,$0.50, and $2 with the purchase of the large pizza.

Participants were asked whether they knew Papa John’s,how much would they be willing to pay for the bread stickswhen they were not on promotion, and their quality expec-tations (1 p low quality, 7 p high quality). Finally, as anattention check, participants were asked to indicate thepromotional price of the bread sticks they had just seen inthe ad.

Results and Discussion

Twelve participants were eliminated from the analysis foreither not providing a price or failing the attention check(Oppenheimer, Meyvis, and Davidenko 2009). Final cell sizes





FIGURE 1

MEAN WILLINGNESS TO PAY (STANDARD ERROR) FORBREAD STICKS (STUDY 1)

FIGURE 2

MEAN WILLINGNESS TO PAY (STANDARD ERROR) FORSPAGHETTI (STUDY 1)

ranged from 26 to 37. Note that including participants whofailed the attention check did not alter the results significantly.Only 8% of participants were familiar with Papa John’s, andthis measure did not affect the results (see fig. 1).

A one-way ANOVA revealed a significant effect on par-ticipants’ willingness to pay for the bread sticks (F(1, 109)p 5.16, p ! .01). Planned contrasts show that participants’willingness to pay for the bread sticks was higher in the freecondition (M p $5.06) than in the $0.50 condition (M p$2.76; F(1, 109) p 8.45, p ! .01), as well as directionallyhigher relative to the $2 condition (M p $3.91; F(1, 109) p1.85, NS). The willingness to pay in the $2 condition (M p$3.91) was significantly higher than in the $0.50 condition(M p $2.76; F(1, 109) p 3.88, p ! .05). Importantly, therewas no significant difference in the willingness to pay acrossthe free (M p $5.06) and control conditions (M p $5.69;F(1, 109) ! 1, NS). The willingness to pay in the controlcondition (M p $5.69) was significantly higher relative tothe $2 condition (M p $3.91; F(1, 109) p 5.02, p ! .05),as well as the $0.50 condition (all M p $2.76; F(1, 109)p 17.06, p ! .001).

One-way ANOVAs on the expected quality of the breadsticks revealed no significant difference across the four con-ditions (F(1, 109) p 1.31, NS). The results suggest that thepromotional price of the supplementary product affects will-ingness to pay for it as a stand-alone product, without af-fecting quality perceptions.

We replicated these results with a different sample of 135participants from the same population (10 participants wereeliminated for failing the attention check) using tomatosauce as the focal product ($8.95) and spaghetti as the sup-plementary product (control, free, $0.50, and $2). A one-way ANOVA revealed a significant effect on willingness to

pay (F(1, 121) p 5.72, p ! .01). As figure 2 shows, will-ingness to pay in the free condition (M p $2.95) was sig-nificantly higher than in the $0.50 condition (M p $1.83;F(1, 121) p 14.06, p ! .001) and directionally higher thanthe $2 condition (M p $2.53; F(1, 121) p 1.90, NS). Thewillingness to pay was significantly higher in the $2 con-dition (M p $2.53) than in the $0.50 condition (M p $1.83;F(1, 121) p 5.90, p ! .05). Again, there was no significantdifference across the free (M p $2.95) and control condi-tions (M p $2.94; F(1, 121) ! 1, NS). Finally, a one-wayANOVA revealed no differences in expected quality of thespaghetti across the four conditions (F(1, 121) p 2.11, NS).

Across two different product categories, study 1 showsthat there was no difference between the control and freeconditions, casting doubts that a free offer devalues the prod-uct. Second, the results demonstrate that consumers’ will-ingness to pay for the supplementary product when offeredas a stand-alone product is influenced by its price on pro-motion. Although a value-discounting hypothesis would pre-dict that willingness to pay should be lower as the pro-motional price of the supplementary product decreases from$2 to $0.50 to free, our findings show that willingness topay for the supplementary product is higher when it is of-fered for free relative to a low, discounted price.

STUDY 2

The main objective of study 2 was to rule out alternativeexplanations. Previous research suggests that a free offermay induce a more positive affect than a low price (Sham-panier et al. 2007). Arguably, the willingness to pay is higherfor a product offered for free than a low price because ofthe positive affect induced by the free offer. In a similar





TABLE 1

MEANS OF DEPENDENT MEASURES (STUDY 2)

Control Free $.25 $1

Willingness to pay $3.33 $3.37 $2.77 $2.72(.17) (.17) (.17) (.17)

Quality of toothpaste 5.00a 4.69a 5.08a 4.90a

(.17) (.17) (.17) (.17)Promotion reactions 3.72a 4.54b 4.25a,b 4.12a,b

(.20) (.20) (.20) (.20)Feelings of reciprocity

toward Aquafresh 4.07a 4.44a 4.43a 4.19a

(.19) (.19) (.19) (.19)Meaningfulness of

promoted price to:Regular price of

toothpaste . . . 3.16a 2.69a 2.86a

(.26) (.27) (.27)Quality of toothpaste . . . 2.92a 2.69a 3.08a

(.22) (.23) (.23)Quality of Aquafresh

products . . . 3.22a 2.77a 3.18a

(.23) (.23) (.23)

NOTE.—At each row, ratings with the same superscript are notstatistically different from each other (p 1 .05). Standard errors arein parentheses.

vein, a free offer may trigger feelings of reciprocity towardthe retailer, which could lead free offers to be perceived asmore valuable. Finally, it is possible that consumers perceivenonzero prices as more “meaningful” or containing moreinformation about the true value of the product. In otherwords, although consumers recognize that the low, dis-counted price is not the real price, they may still believethat a low price gives them a better sense of the true valueof the product than a free offer. Study 2 explores thesealternative explanations.

Method

Two hundred US residents ranging in age from 18 to 67(median age p 28, 67% were males), recruited throughAmazon’s Mechanical Turk (MTurk), participated in thestudy. They were assigned at random to one of four con-ditions: control, free, $0.25, and $1. In the control condition,participants read “The product on the top is the AquafreshGel-Flex toothbrush. Regular price: $6. The product on thebottom is the Aquafresh Extreme Clean toothpaste.” Partic-ipants were shown pictures of the two products in all con-ditions. In the promotion conditions, they read “Considerthe following promotion from Aquafresh: Buy AquafreshGel-Flex toothbrush ($6), and get Aquafresh Extreme Cleantoothpaste for [free/$0.25/$1].” All participants then indi-cated the price they would be willing to pay for the tooth-paste, the expected quality of the toothpaste (1 p poor, 7p premium), and the extent to which the promotion madethem feel happy, excited, and interested (1 p not at all, 7p extremely). We then measured participants’ feelings ofreciprocity toward the brand by asking them to indicate theextent to which they felt positive, grateful, appreciative,close, and interested in Aquafresh (1 p not at all, 7 pextremely). Finally, participants in the promotion conditionsindicated how much the promoted price of the toothpastetold them about the regular price of the toothpaste, the qual-ity of the toothpaste, and the quality of Aquafresh productson 7-point scales (1p nothing, 7 p a lot). Participants thenprovided some demographics.


Four participants did not provide a numerical answer forwillingness to pay and were removed from the analysis. Aone-way ANOVA revealed a significant effect on willing-ness to pay (F(3, 192) p 4.21, p ! .01). As in study 1, therewas no difference between the free and control conditions(Mfree p $3.37 vs. Mcontrol p $3.33; F(1, 192) p .02, NS).Importantly, willingness to pay was lower in the $0.25 con-dition relative to both the free (M$0.25 p $2.77; F(1, 192)p 6.07, p ! .05) and control conditions (F(1, 192) p 5.23,p ! .05) as well as in the $1 condition (M$1 p $2.72; free:F(1, 192) p 7.38, p ! .05; control: F(1, 192) p 6.45, p !

.05). There was no difference across the $0.25 and $1 con-ditions (F(1, 192) p .06, NS).

Table 1 displays the mean measures across all four con-ditions. A one-way ANOVA on quality of the toothpaste

was not significant (F(1, 192) p 1.07, NS). Another one-way ANOVA on promotional reactions (Cronbach’s a p.89) revealed a significant effect (F(3, 192) p 2.80, p !

.05), which was driven by lower perceptions in the controlcondition. This was not surprising given there was no pro-motion in the control condition. An ANOVA excluding thecontrol condition revealed no significant difference acrossthe three promotion conditions (F(1, 145) p 1.05, NS). Aone-way ANOVA on feelings of reciprocity (Cronbach’s ap .93) revealed no significant effect (F(3, 192) p .91, NS).Finally, we examined whether the meaningfulness of thepromoted price of the supplementary product differed acrossconditions. Excluding the control condition (as there wasno price associated with the supplementary product), theanalysis showed no significant effect on regular price of thetoothpaste (F(1, 145) p .81, NS), quality of the toothpaste(F(1, 145) p .76, NS), and quality of Aquafresh products(F(1, 145) p 1.14, NS).

Study 2 replicates the findings of study 1 and rules outseveral alternative explanations. Although the low-price pro-motions ($0.25 and $1) led to lower willingness to pay thana free promotion, there was no difference in positive effector feelings of reciprocity across the three promotion condi-tions. In addition, there was no difference in perceptions ofmeaningfulness of the promoted price in terms of inferringthe regular price across the three promotion conditions. Al-though the findings clearly suggest that the promoted priceaffects willingness to pay when the product is not on pro-motion, it is likely that consumers are not aware of the effectsthat a price on promotion has on their product valuations.





FIGURE 3

MEAN WILLINGNESS TO PAY AND EXPECTED PRICE (STANDARD ERROR) FOR SUPPLEMENTARY PRODUCT (STUDY 3)

STUDY 3Study 3 had two major objectives. First, although our

conceptualization does not distinguish between “free” andthe number zero (Shampanier et al. 2007), a potential con-cern with our studies is that the word “free” may evoke adifferent reaction than the number zero. In addition, whileother promotional prices were represented by a numericalvalue, in the free condition, it was shown as a word. Study3 tests the robustness of the effect by varying the mannerin which the free offer is represented (i.e., free vs. $0.00).Second, although studies 1 and 2 suggest that zero is aspecial price that is not used as an anchor in estimatingwillingness to pay, one may argue that this phenomenon isnot restricted to zero and is actually a function of the fea-sibility of the value. In other words, zero would not be usedas an anchor because it is an implausible reference price.Nothing costs zero. In contrast, although $0.50 may be con-sidered a low price for six breadsticks, it may still not bea completely implausible price. As such, our results may bedriven by the implausibility of zero as an anchor, and otherimplausible prices could lead to the same effect. Study 3examines the robustness of the effect by considering thelowest price above zero ($0.01).

Method

One hundred ninety-four Australian participants, recruitedthrough an online panel company, were assigned at randomto one of three conditions (promotion: free/$0.00/$0.01).

Participants saw a picture of chocolate mousse dessert andread the following text: “Consider the following promotionfrom a restaurant: Special offer of the week! Try our newhouse pizza for $12, and get a chocolate mousse for (free/$0.00/$0.01)!” Participants then indicated their willingnessto pay and expected price of the mousse (open ended) andindicated the expected quality using a 5-point scale (1 ppoor, 5 p excellent). On a new screen, participants werepresented with a second product and promotion: “Considerthe following promotion from Ciao Organics: This weekonly! Buy a box of penne rigate for $5.49, and get a bottleof classic tomato sauce for (free/$0.00/$0.01)!” Pictures ofboth products were shown below the message. Participantsthen answered the same questions about the tomato sauce(willingness to pay, expected price, and expected quality).

In addition to willingness to pay, we also measured ex-pected prices as previous research has shown that price pro-motions have an influence on expected prices (e.g., Davis,Inman, and McAlister 1992). The extent to which a pro-motional price affects expected prices is also relevant fornew products that are launched for free or for a low, dis-counted price.


Figure 3 displays the means of willingness to pay andexpected price across the three conditions. Given that ex-pected price followed the same pattern, we report the resultsof willingness to pay. Sixteen participants did not provide





willingness to pay for both products. In order to use themin the analysis, we used a SPSS procedure to impute missingdata (Howell 2012) based on the existing values. A repeatedmeasures ANOVA on willingness to pay, with product cat-egory being the repeated variable, revealed main effects ofpromotion (F(2, 191) p 8.00, p ! .001) and product (F(1,191) p 9.57, p ! .01) but no interaction (F(2, 191) p 1.82,NS), indicating that although willingness to pay for differentproducts was different (Mmousse p $4.29 vs. Msauce p $3.49),the impact of the type of promotion was the same for bothproducts.

We first examined whether consumers react differently tothe format of the free offer (free vs. $0.00). As shown infigure 3, the presentation format did not have a significanteffect on willingness to pay for chocolate mousse (Mfree p$5.43 vs. M$0.00 p $4.74; F(1, 191) p .96, NS) or tomatosauce (Mfree p $3.99 vs. M$0.00 p $4.01; F(1, 191) p .00,NS). The results are thus robust to variations in how thefree offer promotion is represented.

We next examined whether an implausible low price suchas $0.01 will lead to the effects that we observed for zeroprice. Consistent with studies 1 and 2, the data show thateven a low price of $0.01 lowered willingness to pay com-pared to the zero price conditions (chocolate mousse: Mfree

p $5.43 vs. M$0.01 p $2.71; F(1, 191) p 14.62, p ! .001;M$0.00 p $4.74 vs. M$0.01 p $2.71; F(1, 191) p 8.10, p !

.01; tomato sauce: Mfree p $3.99 vs. M$0.01 p $2.47; F(1,191) p 6.70, p ! .05; M$0.00 p $4.01 vs. M$0.01 p $2.47;F(1, 191) p 6.91, p ! .01). Finally, an ANOVA on qualityexpectations revealed only a main effect for product (F(1,191) p 13.35, p ! .01) but no effect for promotion (F(2,191) p 1.19, NS) or interaction (F(2, 191) p .06, NS).Note that since product order was not counterbalanced, thereis a possibility that responses for chocolate mousse had animpact on responses for tomato sauce. Given the clear pat-tern of results for chocolate mousse, the responses for whichare not contaminated in any way, we believe that this is nota significant concern. We should also note that a repeated-measures analysis using standard scores showed the samepattern of significant results.

Study 3 demonstrates that our findings are robust withrespect to how the free offer is represented (free vs. $0.00).Further, study 3 shows that our findings are not driven bythe implausibility of the anchors. A promotional price of$0.01 for a chocolate mousse dessert or for a bottle of tomatosauce is just as implausible a price as $0.00, but their effectsare significantly different. Our findings are consistent withresearch that suggests that although plausible and implau-sible anchors operate differently, both have a significantimpact on estimates (Adaval and Wyer 2011; Mussweilerand Strack 2000, 2001). Our results suggest that when aproduct is promoted for a low price (plausible or implau-sible), this price is used as a natural anchor, causing a de-valuation of the product. In contrast, when a product isoffered for free, zero is not used as an anchor to estimateits value. Rather, the price of the focal product is used asan anchor. This is more directly tested in studies 4a and 4b.

STUDIES 4A AND 4B

Studies 4a and 4b were designed to more directly examinethe idea that different anchors are used in estimating productvalue depending on whether the supplementary product isbeing offered on promotion for free versus a low, discountedprice. We argue that when the product is offered on pro-motion for a low, discounted price, the low price itself servesas a natural anchor in estimating willingness to pay. In con-trast, when the product is offered on promotion for free, theprice of the focal product is more likely to be used as ananchor to estimate willingness to pay. The implication isthat while the price of the focal product will affect willing-ness to pay when the supplementary product is offered forfree, it will have less of an influence when the supplementaryproduct is offered at a low, discounted price. Said differently,we predict that the impact of the price of the focal product(or required purchase) on the willingness to pay for thesupplementary product will be greater when the supple-mentary product is offered for free than when it is offeredfor a low price. To test this prediction, we manipulate theprice of the focal product (or required purchase) and thepromotional price of the supplementary product. Since stud-ies 4a and 4b use identical procedures, only study 4a isdescribed in detail.

Method of Study 4a

One hundred fifty-one Australian residents, between theages of 20 and 30, were recruited through an online panelcompany. Participants were directed to a specific websiteand were assigned at random to one of four conditions.Participants saw a jewelry store ad in which a silver pendantwas being offered either for free or $5 with a minimumpurchase of either $99 or $299. After participants read thead, they were asked to state how much they would be willingto pay for the pendant when it was not on promotion. Inaddition, they were asked to indicate the extent to whichthey agreed or disagreed with the following statements (1p strongly disagree, 5 p strongly agree): “It is a greatpromotion,” “This is an effective promotion,” and “The sil-ver pendant is of high quality.” Finally, participants wereasked to indicate the price of the pendant they had just seenin the ad as an attention check.

Results of Study 4a

Twelve participants were eliminated for failing to providea numerical value for willingness to pay or failing the at-tention check (although including these participants did notchange the results significantly). The analysis is based onthe remaining 139 participants.

A 2 # 2 ANOVA on willingness to pay revealed sig-nificant main effects for minimum purchase amount (F(1,135) p 4.81, p ! .05) and price of supplementary product(F(1, 135) p 12.33, p ! .001). These main effects werequalified by a significant two-way interaction (F(1, 135) p5.31, p ! .05). Planned contrasts showed that the willingness





FIGURE 4

MEAN WILLINGNESS TO PAY (STANDARD ERROR) FORSILVER PENDANT (STUDY 4A)

FIGURE 5

MEAN WILLINGNESS TO PAY (STANDARD ERROR) FOR WINETHERMOMETER (STUDY 4B)

to pay for the pendant did not significantly differ across the$299 and the $99 minimum purchase conditions when thependant was offered on promotion for $5 (all M p $26.50and $27.20; F(1, 135) ! 1, NS). In contrast, when the pen-dant was offered on promotion for free, willingness to paywas significantly higher in the $299 condition than in the$99 condition (all M p $65.17 and $37.43; F(1, 135) p6.26, p ! .05). Consistent with our conceptualization, will-ingness to pay was influenced by the minimum purchaseamount when the supplementary product was on promotionfor free but not when it was offered for a low, discountedprice (see fig. 4).

Two separate ANOVAs revealed that participants’ eval-uations of the promotions were significantly affected byminimum purchase amount but not by the price of the sup-plementary product or the two-way interaction. Not sur-prisingly, participants perceived the promotion to be moreeffective (all M p 3.10 and 2.70; F(1, 135) p 7.41, p !

.01) and greater (all M p 2.88 and 2.51; F(1, 135) p 6.95,p ! .01) when the minimum purchase requirement was $99rather than $299. Perceptions of the pendant quality weremarginally higher in the $299 condition than in the $99condition (all M p 2.80 and 2.58; F(1, 135) p 3.42, p !

.07). No other effects were significant.

Method and Results of Study 4b

Study 4b was a replication of study 4a wherein a specificpurchase was required to avail oneself of the promotion.One hundred ninety participants saw an ad from a localwinery offering a wine thermometer for free or $5 whenthey purchased a bottle of wine for $50 or a box with six

bottles of wine for $300. Participants were asked to considerthe wine thermometer as a gift for a friend who really en-joyed wine and indicate their willingness to pay for theproduct. Thirty-six participants were eliminated for failingthe attention check (not being able to recall the value of thepromotional price of the thermometer). An ANOVA on will-ingness to pay with the remaining participants revealed sig-nificant main effects for thermometer price (F(1, 150) p11.68, p ! .001), wine price (F(1, 150) p 6.24, p ! .05),as well as the two-way interaction (F(1, 150) p 6.32, p !

.05). As figure 5 shows, willingness to pay for the supple-mentary product was affected by the price of the focal prod-uct in the free condition (M$50 p $13.62 vs. M$300 p $24.12;F(1, 150) p 15.02, p ! .001) but not in the $5 condition(M$50 p $11.73 vs. M$300 p $11.69; F(1, 150) ! 1, NS).

As in study 4a, participants were also asked to indicatethe extent to which they agreed with the following state-ments: “It is a great promotion,” “This is an effective pro-motion,” and “The wine thermometer is probably of highquality.” ANOVAs on each measure failed to reveal anyeffects (all p 1 .15).

Studies 4a and 4b provide strong support for the conten-tion that when a product is offered on promotion for free,zero is not used as an anchor to estimate its value once thepromotion is retracted. Rather, the price of the focal productserves as an anchor, thus increasing the accessibility of com-mensurate or anchor-consistent values. In contrast, when aproduct is offered at a low, discounted price, the low priceitself serves as a natural anchor, thus precluding the use ofthe focal product price as an anchor. Consistent with ourconceptualization, willingness to pay for the pendant andthe thermometer were strongly influenced by the focal pur-chase amount when the products were offered on promotion





for free but not when they were offered at a low, discountedprice of $5.

STUDY 5

Study 5 had two main objectives. First, we wish to providefurther evidence for the price anchoring mechanism. Weexplicitly asked participants to consider a new anchor afterbeing exposed to the promotion of either the free offer ora low, discounted price. The extent to which participantsshift to using the new anchor is likely to eliminate the in-fluence of the initial price anchor. Specifically, in the caseof a free offer, the anchor will shift from the price of thefocal product to the new anchor, whereas in the case of adiscounted price, the anchor will shift from the low priceto the new anchor in estimating willingness to pay. Use ofthe same price anchor as opposed to different price anchorshas at least two implications. First, since the new anchorwill be used in both cases, willingness to pay estimatesshould not vary across the free offer and low, discountedprice conditions. Second, given that offering a product onpromotion for a low, discounted price leads to product de-valuation, shifting the anchor away from the low, discountedprice may allow the product to rebound after it has beenoffered on promotion for a low, discounted price.

The proposed price anchoring effects on estimates of will-ingness to pay are deemed to occur at perhaps at a heuristiclevel by activating anchor-consistent prices. As such, a sec-ond objective of study 5 was to test whether the influenceof the price anchor is restricted to relatively quick judgmentsor whether it persists even in situations where there is moredeliberation (Adaval and Wyer 2011). In order to test thisidea, half of the participants were asked to think about thesupplementary product before providing their estimates ofwillingness to pay.

Method

Participants were 657 US residents, members of Ama-zon’s MTurk. They were assigned at random to one of 18conditions in a 3 (promotion: control vs. free vs. $0.25) #3 (price question: control vs. $0.50 vs. $6) # 2 (thoughts:before vs. after willingness to pay) between-subjects fullfactorial design. All participants read the following: “Con-sider the following promotion from Ciao Organics: Thisweek only! Buy a box of penne rigate for $5.49, and get abottle of classic tomato sauce for [a special price/free/$0.25]!” Below this text, they saw a picture of the two prod-ucts. In the thoughts before condition, participants indicatedon 7-point scales their expectations regarding quality, taste,healthiness of the product, and their evaluation of the brand.After that, participants were asked to write down all of theirthoughts about the tomato sauce. These questions weremeant to get participants to think about product in order toinduce a more deliberate judgment. Participants in the pricequestion control condition then indicated their willingnessto pay for the tomato sauce. Those in the other price questionconditions answered whether they thought the tomato sauce

would normally cost more than [$0.50/$6] and then indi-cated their willingness to pay. These other prices [$0.50 and$6] were intended to be the new price anchors. In thethoughts after condition, participants evaluated the productand wrote their thoughts only after indicating their willing-ness to pay.


An ANOVA on willingness to pay revealed no influenceof order of thoughts or its interactions (all p 1 .50; control:Mbefore p $3.25 vs. Mafter p $3.36; free: Mbefore p $3.34 vs.Mafter p $3.20; $0.25: Mbefore p $2.84 vs. Mafter p $2.87).However, consistent with a price anchoring mechanism,there was a significant interaction between promotion andprice question (F(4, 648) p 2.61, p ! .05). In the no-pricequestion condition where there was no new anchor, the con-trol and free conditions did not differ (Mcontrol p $3.28 vs.Mfree p $3.25, F(1, 648) p .02, NS), but both were higherthan the $0.25 condition (M$.25 p $2.24; control: F(1, 648)p 15.87, p ! .001; free: F(1, 648) p 14.52, p ! .001).These data replicate findings from our previous studies.

Importantly, the presence of an explicit price questionprovides a new price anchor and thus attenuates the influenceof the promotion price. While it is not surprising that es-timates of willingness to pay were lower when the new priceanchor was $0.50 relative to $6 (F(1, 648) p 28.03, p !

.001), willingness to pay was not significantly different (allp 1 .4) across any of the promotion price conditions in eachof the price question conditions ($0.50 price question: Mcontrol

p $2.81, Mfree p $2.87, M$.25 p $2.66; $6 price question:Mcontrol p $3.83, Mfree p $3.69, M$.25 p $3.67). ANOVAson the other variables (product and brand evaluation) re-vealed no effects (all p 1 .10).

Study 5 lends further support for our proposed anchoringmechanism. In the absence of an explicit price question, wereplicated the finding that the willingness to pay was higherin the free promotion condition than in the low price con-dition. However, when participants were asked to explicitlyconsider a new anchor, the influence of the price on promotionwas attenuated. In other words, the new price question anchorreplaces the initial anchor based on either the price of thefocal product (when supplementary product is offered forfree) or the price of the supplementary product (when thesupplementary product is offered for a low, discounted priceof $0.25). The results also suggest that it may be possible fora devalued supplementary product to rebound after it has beenon promotion for a low, discounted price.

Because previous research has documented that delibera-tion about the product may reduce the influence of an anchor(Adaval and Wyer 2011), it was somewhat surprising thatdeliberating about the product had no influence on estimatesof willingness to pay. The discrepancy may be due to dif-ferences in the timing, as well as the manner in which de-liberation was manipulated. While in Adaval and Wyer (2011),participants listed any thoughts about the product prior tobeing exposed to any price information, participants in ourstudy listed their thoughts after being exposed to the price





FIGURE 6

MEAN WILLINGNESS TO PAY (STANDARD ERROR) FOR TOMATO SAUCE (STUDY 5)

information and were further guided by quality, taste, andhealthiness scales. Since participants had already been ex-posed to the price information, our deliberation manipula-tion may have led to anchor consistent thoughts, whichwould preclude any reduction in the influence of the anchor(fig. 6).

GENERAL DISCUSSIONThe primary objective of this research was to examine

how the promotional price of a product affects consumers’judgment of its value once the promotion is retracted. Basedon an inferential process, previous research suggests thatfree offers are devalued (Kamins et al. 2009; Raghubir2004). The inferential process assumes that consumers eval-uating a promotion with a free offer would reason that the

product being offered for free would be of low cost in orderto be given away for free (Raghubir 2004), or that the focalproduct is of low quality necessitating being promoted witha free product (Kamins et al. 2009; Raghubir 2004). Ac-cording to this perspective, the extent to which a free offerdevalues the product, one would expect a price above zeroto devalue it less.

In contrast to the value-discounting hypothesis, we pro-pose that the price that consumers are willing to pay for aproduct when a promotion is retracted is likely to be higherwhen it is offered on promotion for free than when it isoffered for a low, discounted price. In fact, we argue thata free promotion offer may not devalue the product at all.Adding to the literature on price promotions, our concep-tualization is based on an anchoring process whereby anexternally provided price anchor biases subsequent numer-





ical judgments. Specifically, we propose that the selectiveaccessibility model (Strack and Mussweiler 1997) best rep-resents the underlying process whereby the anchor increasesthe accessibility of anchor-consistent information. We arguethat the nature of the anchor used in estimating product valuediffers depending on whether the product is promoted forfree or for a low, discounted price. Our research also con-tributes to the literature that documents the special propertiesof zero by demonstrating a discontinuity in the transitionfrom small numbers to zero. While previous research showsthat people overreact to free components (Chandran andMorwitz 2006) and zero (or free) prices (Shampanier et al.2007), this research suggests that zero price provides thebenefit of not being used as an anchor, thus necessitatingthe use of other contextual information in estimating productvalue.

Study 1 begins the investigation by demonstrating thatthe price that consumers are willing to pay for the stand-alone supplementary product is higher when it is offeredfor free during the promotion than when it is offered at alow, discounted rate. This finding is inconsistent with thevalue-discounting hypothesis, which suggests that the lowerthe promoted price of the supplementary product, the lowerconsumers’ cost inferences about the product thereby lead-ing to lower willingness to pay for the product when it isnot on promotion. Importantly, study 1 showed that whilea low promotion price leads to lower willingness to payrelative to a control condition where there was no priceinformation, a free offer was not significantly different fromthe control condition. Replicating the findings across twoproduct categories, study 1 suggests that a free promotionoffer may not devalue the product at all. Study 2 furtherreplicates the findings in yet another product category andrules out alternative explanations based on positive affect,feelings of reciprocity, and the perceived meaningfulness ofthe information that a zero (free) versus low price mayprovide about the true valuation of the product.

Study 3 demonstrated the robustness of the findings byshowing that willingness to pay for a product does not varybased on whether the price on promotion is represented as“free” or $0.00. Importantly, study 3 also shows that evena price of $0.01 is used as an anchor considerably reducingwillingness to pay and expected price in comparison to afree price condition. Study 3 thus rules out an alternativeexplanation based on price implausibility as it would bedifficult to argue that $0 is an implausible price for productslike chocolate mousse and tomato sauce, but $0.01 is not.

Studies 4a and 4b provide more direct evidence for theuse of different anchors in estimating product value de-pending on whether the supplementary product is being of-fered on promotion for free versus a low, discounted price.Across two product categories, studies 4a and 4b show thatthe willingness to pay for the stand-alone supplementaryproduct does not differ with the price of the focal productwhen the supplementary product is offered on promotionfor a low, discounted price. This result is consistent withthe reasoning that since the promotional price of the sup-

plementary product itself serves as a natural anchor, the priceof the focal product is less likely to influence willingnessto pay. In contrast, the results show that consumers’ will-ingness to pay for the supplementary product increases withthe price of the focal product or purchase when the sup-plementary product is offered on promotion for free. Theseresults attest to our reasoning that in the absence of anyprice information about the supplementary product, the priceof the focal product is more likely to be used as a priceanchor when the supplementary product is offered for free.As such, the willingness to pay for the supplementary prod-uct will varies with the price of the focal product or pur-chase. Taken together, the results are consistent with the useof different price anchors based on the promotional priceof the supplementary product.

Study 5 further attests to the price anchoring mechanismby providing a new price anchor. In the absence of a newprice anchor, the results replicate the findings of studies 1, 2,and 3 such that although the willingness to pay for the productafter promotion did not differ across the free and controlconditions, the willingness to pay in both these conditionswas higher than in the $0.25 promotion price condition. How-ever, when a new price anchor was provided, the effect ofthe promotional price of the supplementary product on will-ingness to pay attenuated. Not surprisingly, the new priceanchors had an influence such that the willingness to pay forthe supplementary product was higher in the $6 price questionthan in the $0.50 price question. Together, the results suggestthat participants were using the price question as the newprice anchor on which to base their willingness to pay ratherthan the initial price anchors of either the price of the focalproduct or the price of the supplementary product. Further, asupplementary product that is devalued due to its low, dis-counted price on promotion may rebound if the price anchorcan be shifted. Study 5 also demonstrates that the findingsare robust to whether individuals deliberate about the productafter being exposed to the price anchor but prior to statingtheir willingness to pay.

In terms of the underlying process, the evidence acrossthe series of studies reported is quite compelling for theselective accessibility model such that the anchoring effectsare mediated by a selective increase in the accessibility ofanchor-consistent information. We argue for the use of dif-ferent price anchors based on whether the supplementaryproduct is offered on promotion for free versus a low, dis-counted price. While the price of the supplementary productitself serves as a natural anchor when it is offered for a lowprice, the price of the focal product or purchase serves asa price anchor when the supplementary product is offeredfor free. As such, willingness to pay for the supplementaryproduct varied directly with the price of the focal productwhen it was offered on promotion for free. Raghubir (2004)reported similar findings and, in the absence of a controlcondition without any price information, interpreted thefindings to be consistent with the value-discounting hy-pothesis. In our studies, willingness to pay estimates did notdiffer across the free and control conditions in any of the





studies thus demonstrating that a free offer may not nec-essarily devalue the promoted product. Kamins et al. (2009)showed that a free offer lowered willingness to pay for thefocal product and the supplementary product when askedseparately but not when asked in a bundle. It is possiblethat stating willingness to pay for both the focal product aswell as the supplementary product may get consumers todeliberate about the promotion thus generating negative in-ferences. In our studies, thinking about the value of the sup-plementary product does not seem to generate the inferentialprocesses required for devaluation to occur. Nonetheless,identifying conditions under which consumers deliberateabout the overall promotion itself thereby triggering nega-tive attributions versus thinking about product valuation isoffered as an area for future research.

The managerial implications of our findings are straight-forward. First, marketers should be aware that promotionswith low, discounted prices devalue products more than freeoffers. Second, free offers may not devalue products at all,as consumers use the price of the focal product to estimatevalue of the supplementary product. In this sense, one mayeven raise perceptions of value of a product by offering itfor free with an expensive purchase. As such, marketerswould be better served to use a free promotion in terms ofshort-term incentives but also to avoid unintended long-termconsequences.

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Free Offer ≠ Cheap Product: A Selective Accessibility Account on the Valuation of Free Offers

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