'When Stuff Is Free, We�re More Likely to Buy'

from the oh-really? dept

Wed, Jul 27th 2011 3:24pm — Mike Masnick

Scott Wetterling was the first of a bunch of you to send in one of the many stories about how when 7-Eleven offers free slurpees, their sales of slurpees goes up. They say this is "odd behavior," but I don't buy that all. Free has been a compelling part of getting people to buy stuff for ages, even if that involves buying what is free. We've certainly seen this in other fields as well, such as when Cory Smith took his free MP3s off of his website... and immediately saw his iTunes sales plummet. People berate the use of free because they don't understand how it works. And, then, when it does work, they describe the behavior as "odd." Perhaps it's not odd at all once you realize how it works.

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Filed Under: economics, free, purchases

48 Comments

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The Devil's Coachman (profile), 27 Jul 2011 @ 3:34pm

Every drug dealer knows this fact
Corporate morons in suits know nothing about it.
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HothMonster, 27 Jul 2011 @ 3:34pm

The caveat is, free only helps sales if your product is good.

The AC thats gonna come in here calling us all freetards is mad because his content was shit so no one ever wanted to pay for it. But he overvalues it, so he will never get it
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out_of_the_blue, 27 Jul 2011 @ 3:40pm

So why don't they have "free" Slurpees EVERY day?
We all know the answer to that, and it TOTALLY disproves the ninnying point you attempt: this is a ONE DAY advertising gimmick. -- And I wouldn't have one even if "free".
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Atkray (profile), 27 Jul 2011 @ 3:42pm

Re: Every drug dealer knows this fact
They understand it at Costco. That's why I stay away from there on Saturdays.
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Mike42 (profile), 27 Jul 2011 @ 3:44pm

Re: So why don't they have "free" Slurpees EVERY day?
Hothmonster called it...
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HothMonster, 27 Jul 2011 @ 3:45pm

Re: So why don't they have "free" Slurpees EVERY day?
Blue for president!
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HothMonster, 27 Jul 2011 @ 3:46pm

Re: Re: So why don't they have "free" Slurpees EVERY day?
no this isnt the one im talking about, blue is just crazy
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Anonymous Coward, 27 Jul 2011 @ 3:48pm

Re: Re: So why don't they have "free" Slurpees EVERY day?
Yes he did. Out of the blue does not get it though, and does not even understand the difference between revenue and profit. Jut my two cents from a comment I saw on another post.
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Daddy Warbucks, 27 Jul 2011 @ 3:51pm

Re: So why don't they have "free" Slurpees EVERY day?
7-11 should offer the mini for Free, like Costco's taste. People will investigate, realize that the mini won't satisfy them and buy the large.
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Greevar (profile), 27 Jul 2011 @ 3:54pm

Re: So why don't they have "free" Slurpees EVERY day?
Baker's Square has a "Pie Rush Wednesday". Every Wednesday, if you come in and order a entree, they will give you a free slice of pie. Guess what? The place is always packed on Wednesday. The lesson here is that free gets traffic in the store which gives you the opportunity to sell them other stuff. You just have to figure out what free things they will come for and what they will buy.
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cjstg (profile), 27 Jul 2011 @ 3:56pm

Re: So why don't they have "free" Slurpees EVERY day?
so i guess i'm confused. are you saying that this doesn't work and all the evidence to the contrary is wrong? or are you saying that they shouldn't do it because it is immoral or wrong? or...well...exactly what are you saying?

i'm still confused.
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HothMonster, 27 Jul 2011 @ 3:57pm

Re: Re: So why don't they have "free" Slurpees EVERY day?
really?????? i used to work at Bsquare and we never had this, but that was ages ago. I'm gonna half to stop by the local one on wednesday(oooohhh thats today) and see if they do this. Now I have to start thinking about what kind of pie i want, i havnt had bsquare in ages.
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Anonymous Coward, 27 Jul 2011 @ 3:59pm

Conflating loss leaders with piracy. Nice work.
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Nicedoggy, 27 Jul 2011 @ 4:05pm

http://pewresearch.org/pubs/2070/online-video-sharing-sites-you-tube-vimeo

http://money.cnn.com/n ews/newsfeeds/gigaom/articles/broadband_cord_cutters_not_replacing_cable.html?section=money_technolo gy&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_technology+%28 Technology%29

With 71% of people turning to video streaming sites, P2P declining and people cutting the cord because of the price one could probably assume that those people who don't understand the free concept will suffer in the near future.
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el_segfaulto (profile), 27 Jul 2011 @ 4:10pm

Re: Re: So why don't they have "free" Slurpees EVERY day?
From the way he talks and general intelligence level, I was under the impression that Blue was already our vice president.
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Greevar (profile), 27 Jul 2011 @ 4:10pm

Re: Re: Re: So why don't they have "free" Slurpees EVERY day?
I always love their honey mustard salmon and have a slice of oreo pie to finish it off. Yummy!
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el_segfaulto (profile), 27 Jul 2011 @ 4:18pm

Re: Re: So why don't they have "free" Slurpees EVERY day?
Where I live, the first Saturday of every month is a winewalk. It's reasonably inexpensive ($10) and the local shops put out a ton of free food and merchandise for the walkers. It has the double benefit of increasing foot traffic and inebriated traffic. The owner I talked to last time said that they make more on that one Saturday than any single week throughout the rest of the month.
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reboog711 (profile), 27 Jul 2011 @ 4:25pm

With 7-11..
With 7-11 eleven is it because the promise of Free Slurpees gets people into the store only to discover they are out of the "Free Slurpie" cups?

It actually turned me off from buying a Slurpie or going back to 7-11.
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DCL, 27 Jul 2011 @ 4:26pm

Re:
Loss leaders = something given away for free to get you in a position want to buy something else.

-Give away samples and people buy the full product AND you got them in your store

-Example: Give Slurpees away and people buy more Slurpees AND more snacks while they are there.

Giving music away free (called piracy in comment above) = something given away for free to get you in a position to buy something else

-Give away samples and people buy the full product AND you got people in your fan base

-Example: Give music tracks away and people buy full albums and go to shows AND buy shirts while they are there.

I don't see too much conflating in a negative sense you convey... think the negative conflating is you with free and piracy... Nice work.
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Jay (profile), 27 Jul 2011 @ 4:28pm

Re:
"Conflating loss leaders with piracy"

Alright genius. What's the difference?
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Anonymous Coward, 27 Jul 2011 @ 4:33pm

Re: With 7-11..
Yup, not being able to get what you wanted free, did not mean you bought it instead and what's more it had a negative impact on sales to you forever.

Free is good for everyone, hobbling free makes very unhappy people who will prefer to not be customers.

Smart people have gotten that already, now just waiting for some of the legacy industries to catch up. Gawd they're slow.
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txpatriot, 27 Jul 2011 @ 4:43pm

Re:
This is another example of the apparently commonly held belief that pirates won't buy what they pirate (meaning there is no lost revenue as a result of piracy).

This contradicts a recent study that showed that pirates apparently do buy more legal stuff after they "try it first" (albeit illegally).

So which is it: do pirates buy or not?
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Any Mouse (profile), 27 Jul 2011 @ 4:44pm

Re: So why don't they have "free" Slurpees EVERY day?
"We've certainly seen this in other fields as well, such as when Cory Smith took his free MP3s off of his website... and immediately saw his iTunes sales plummet."

So, was THAT a one day advertising gimmick? Or did you just not even bother to read? Come on, you can troll harder than that.
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Ed C., 27 Jul 2011 @ 4:45pm

Some might even say they're "retarded". (Sure, it's technical the same as calling them "slow", but some will cry that the word isn't PC.)
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ltlw0lf (profile), 27 Jul 2011 @ 4:46pm

Re: With 7-11..
With 7-11 eleven is it because the promise of Free Slurpees gets people into the store only to discover they are out of the "Free Slurpie" cups?

Didn't have a problem getting one at 06:00, early worm and all. The problem was that when I came back at 16:00 (and didn't want one,) I noticed that many of the same people were there. When I asked the clerk, he said that quite a few of them stopped by multiple times for free slurpees, and thus they were out of cups. I had thought that they would regulate the number of times you could get a free one...but I suspect the problem was they just were overwhelmed. I did see that even when people got free slurpees in the morning, they bought a lot of other stuff along with the free slurpee.

Interesting though...I went back a number of times in the afternoon and saw quite a few folks with large slurpees...though those days were abnormally hot and it could have just been coincidence.
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The Mighty Buzzard (profile), 27 Jul 2011 @ 4:50pm

Re: Re:
Whose idea it was.
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Vincent Clement (profile), 27 Jul 2011 @ 4:57pm

Re: Re:
Pirates buy. During the 'CD era', I recorded plenty of CDs onto cassette tapes. But I also bought plenty of CDs (Toronto used to have four large music stores within a block of each other).
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The Mighty Buzzard (profile), 27 Jul 2011 @ 4:57pm

Re: Re: With 7-11..
I'd think it would be a better example of Pissing Off Your Customers is a Bad Idea. You know, like suing those of your customers who purchase the most music.
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The Mighty Buzzard (profile), 27 Jul 2011 @ 5:01pm

Re:
Way off-topic tangent here. Does it bother anyone else that the subgroups that make up the most dedicated Mac users are the most PC?
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Jake, 27 Jul 2011 @ 5:05pm

Re: Re:
Some people will, when they discover that torrent uploaders can be lazy about things like track numbers and quality can be a crapshoot, as well as be more inclined to impulse-buy stuff from the same creators. Others would do this but can't afford to. A few will absolutely refuse to pay money for anything they can get for free no matter how much extra inconvenience and loss of quality may result, either out of some ideological conviction or because they're pathologically opposed to spending money.
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ken (profile), 27 Jul 2011 @ 5:21pm

Marketing 101
Marketers understand that giving away stuff, particularly to high value customers, is extremely important for raising sales. Somewhere along the way the movie and music industries have forget this concept.

The music and movie industries need to stop listening to their lawyers and listen to their marketers who I'm sure are constantly frustrated with their employers constantly undermining them.
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Anonymous Coward, 27 Jul 2011 @ 5:24pm

Re: So why don't they have "free" Slurpees EVERY day?
From the linked article (emphasis mine):
"Slurpees are free today at 7-Eleven. And, oddly enough, if consumers act like they have on previous Free Slurpee Days, the number of customers paying for Slurpees will soar today.

Last year on Free Slurpee Day, 7-Eleven slushed out 4.5 million free Slurpees�at the same time that Slurpee sales increased 38% that day, reports USA Today."

Maybe try to understand what people are talking about so as not to make pitifully uninformed comments.
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David Muir (profile), 27 Jul 2011 @ 6:42pm

Re:
Conflating loss leaders with piracy. Nice work.

First of all, conflating means to combine two ideas into one. It is not a synonym for "confusing", which is what I think you're accusing the article of doing.

Secondly, the article never mentions piracy. No one is going to convince you that this site isn't a pro-piracy site, but I can say it again: it's not.

This particular article merely makes the point that free has a place in a business model. It ENCOURAGES businesses to think about what that place might be. It does not say: loss leaders (which by the way is just one variation of free in business models) are the same as piracy.

For example: as the cost of distribution approaches zero, giving away digital content is not even done at a loss. One model takes advantage of that non-scarce resource to help sell scarce ones. Try reading the primer on these kinds of economics that appeared here as a series a couple of years ago.

(My apologies if I got any of the technical details wrong... I'm just learning this stuff myself.)
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Alien Bard, 27 Jul 2011 @ 9:17pm

Re:
Thanks for the link. I already suspected those results but it's interesting to see my opinion supported by official market research.
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Karl (profile), 27 Jul 2011 @ 9:39pm

Typo
Small typo:

"but I don't buy that all"

...should be "but I don't buy that at all."

Love, The Grammar Nazis.
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Karl (profile), 27 Jul 2011 @ 9:45pm

Re: So why don't they have "free" Slurpees EVERY day?
And I wouldn't have one even if "free".

Ah, so you couldn't possibly be considered a "lost sale," then.

Good to know.

Pity the Big Content industry (RIAA/MPAA/CoC, etc) doesn't actually admit what you just said.
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Karl (profile), 27 Jul 2011 @ 9:50pm

Re:
Conflating loss leaders with piracy. Nice work.

Seeing as Mike never even brought up "piracy," I'm pretty sure you're the only one conflating them. In fact, this is a common tactic among paid shills for Big Content: accusing "loss leaders" of being pirates, saying they're "devaluating" content, and so on.

So, nice work.

And I mean that literally.
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Anonymous Coward, 27 Jul 2011 @ 10:01pm

When you give free samples, you can sell your product in the future.

When you give your product away all the time, nobody buys it.

The difference is obvious to everyone except Mike Masnick.
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Anonymous Half-Pirate, 27 Jul 2011 @ 10:19pm

Lost Sales
responding to an above comment asking if pirates buy...

Over maybe 16-18 years I purchased many games and programs. I purchased shareware that worked and that did as advertized; I bought operating systems and I bought hardware. I bought LOTS of games; we're talking thousands of dollars on software.

I started being upset when the game I just shoveled out for came with a notice on it to "download the patch right away." This swiftly segued into companies putting out crapware, bloatware and half-assed-ware; incomplete, bugridden and jacked programs and games. Advertised features that 'weren't exactly up to par" and blatantly false claims and... you know the story.

So yes, I started "pirating" games - because I wasn't going to shell out 70$ for a piece of crap that not only wouldn't run but would bork my system. Yes, I want to play a level or three before I shell out cash to you; you want my money? Make a game worth it and I will gladly pay. I even paid for shareware which I found useful and well-written.

I am not a storer: I try something and if it sux, doesn't meet the need as advertised or borks up my config, it's trashed. If I do find something that meets those criteria, I buy it, particularly with software; I want those updates! and manual! and patches and forum access and the whole 9 yards and I am quite happy to pay for that rather than depend on a pirate version who's "crack" might be a hex-bork of the one little feature most people could "do without" or a major slice through the guts of a program, making it unstable and prone to crashing.

I also "pirate" no-cd patches for my registered, physical-copy games because I like to keep certain cd/dvds (data and music) in my decks, I paid for the damned game, it's entirely loaded onto my hard disk anyway and I have had MUCH trouble with a lot of commercial cd/dvds that use cheap media, get scratched or fogged or plain old bent in the case and drive a cd deck crazy with rereads.

So the "lost sales" from me are bull. I buy stuff. I just don't buy every piece of tripe or new-shiny because it's a lot of ill-made, low-quality garbage. If it's crap, I don't buy; it's that simple.

so, Arrrrrr!~
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The eejit (profile), 27 Jul 2011 @ 11:06pm

Re: Re:
No, I'll give you a Loss-leader that makes a company money: The XBox 360. Considerable loss-leader that generates profits on other hardware and the software.
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Keroberos (profile), 27 Jul 2011 @ 11:09pm

Re: Giving Product Away
Nowhere in any of Mike's posts have I ever seen him say to give all your products away for free, only to give away what makes sense to give away--things that can be produced/distributed for little or no cost--for a musician it would be digital songs, which helps build a fan-base that is willing to pay for things that are scarce--concert tickets would be one thing (which give musicians more profits then music sales ever did). But yes giving away music is bad for the record labels--shows how economically unsound tying your entire business model around selling a single product--100 years ago it was a bad time to be a buggy whip manufacturer--heck, 25 years ago it was a bad time to be a typewriter manufacturer, and it's starting to be bad to be in non-digital publishing. which really just proves no business stays stable over time, Even Nintendo started out as a playing card company (1889�1956), Amazon stated out selling books, but now sell just about everything, I could go on and on. All Mike talks about is finding new business models that work, not crying and trying to pass draconian new laws because the old ones don't.
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PaulT (profile), 28 Jul 2011 @ 12:07am

Re: Re: So why don't they have "free" Slurpees EVERY day?
...but that's all he has!
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Marcel de Jong (profile), 28 Jul 2011 @ 1:28am

Re:
"All the time", that's always been YOUR schtick, not ours. But confuse the issue more, why don't you.

Fact is, free stuff brings people to your door. Free stuff can work as advertisement for your for-pay stuff. You know, the scarce stuff, like concert tickets, t-shirts, CDs, DVDs, movie posters, artist's attention, personal engravings, sculptures, paintings.

In the case of paintings is another example of how free samples can drive sales.
Say you have a painting for sale, how do you advertise it, after all Why would anyone buy a painting sight unseen?

Perhaps by selling a digital photo of that painting first? Of course not, why would anyone want buy a photo of a painting sight unseen, if they don't want to buy the painting sight unseen?
So you show that photo for free and shop it around on like-minded sites. And if it's good enough, it'll drive traffic and thus interest.
That's how it works in other artistic markets too. You shop the music/movies around on file sharing networks as a teaser, and if it's good enough people will buy it or go to the cinema to watch it. (for example: Wolverine)

But since the MAFIAA failed the kindergarten exam of sharing (they never learned to share), they don't want to know about all this.
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Richard (profile), 28 Jul 2011 @ 2:13am

Re: So why don't they have "free" Slurpees EVERY day?
this is a ONE DAY advertising gimmick.

The key point is that with physical good the free offers cost you money to provide - so they will always be limited - with infinite goods the rules are different.
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Prisoner 201, 28 Jul 2011 @ 3:52am

Re: Re: Re:
Steam!

I recently bought a bunch of games for like 5 eur each when they were on campaign. Quick and easy install (with updates!), you know you dont get any malware, and you can access them from any of your computers. Heck, you can delete them and if you feel the itch again they are reinstalled half an hour later!

Beats the piratebay hands down.
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Nicedoggy, 28 Jul 2011 @ 4:55am

Re:
Hmmm really?
how do TV networks make money then?
How do radio stations make money?
How Pirate Coelho is making money?
How all those schmucks on Youtube are making 6 figures?
How all those other schmucks using ebooks are making millions?
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Anonymous Coward, 28 Jul 2011 @ 7:03am

Re: Re:
Oh doggy, it must be nice to be 15 a full of pep!

Tv, Radio, etc are not free. Once you get over that concept, you will understand the world much better. You pay for things with your attention to the advertising. Just because you didn't give them money doesn't make it free.

Once you understand that very basic theory, you will stop worrying about free, and you will start paying attention to see how you are paying.

The free I object to is the one where the costs of the free are rolled up into a more expensive "scarce" product. Free slurpies today means that every slurpie tomorrow is more expensive, because those advertising costs have to get rolled in somewhere. It wasn't free, it just appeared to have no cost to the user. But it had cost overall, someone paid the freight.

I know it's tough, but it's like grade 9 math. It seems hard at the time, but one day you will get it!
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PaulT (profile), 28 Jul 2011 @ 7:23am

Re: Re: Re:
"Tv, Radio, etc are not free. "

They are to the end user.

"You pay for things with your attention to the advertising."

Funny. Some people watch them. Some fast forward or tune out on their iPhone for a few minutes. Some change channels or go to the bathroom or make a drink. Are you saying that those people get, and have always gotten the content for free?

"Just because you didn't give them money doesn't make it free."

So, that means that the free downloads I've gotten from the iTunes store this week weren't free? I'm confused... how did I pay? Does this mean you're finally accepting that the direct exchange of currency is not the only way for content to be paid for?

"Free slurpies today means that every slurpie tomorrow is more expensive, because those advertising costs have to get rolled in somewhere."

Wouldn't that be the profits from the increased sales of the slurpees? You know, the profits from sales that wouldn't have been made without the free slurpees? Maybe I'm missing something here?

"It wasn't free, it just appeared to have no cost to the user. But it had cost overall, someone paid the freight."

Yep. But, was that cost more than or less than the profits gained from the sale of higher ticket items? You're coming dangerously close to realising what the actual argument is here.
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