Free Product as a Complement or Substitute for a Purchased Product–Does it Matter

U. Spiegel, Uri Benzion, Tal Shavit

Research output: Contribution to journalArticlepeer-review

Abstract

The purpose of this paper is to examine whether price discounts or buy one get a different item free (BOG-DIF) offers are more attractive to consumers. This paper examines empirically (through the use of two dif-ferent questio nnaires) the effect t hat the relationsh ip between the pu rchased and the free p roduct has on con-sumer preference. A rational framework is presented and tested empirically for differing scenarios. When comparing a 50% discount to BOGDIF, it is found that the promotion's attractiveness is influenced by the relationship between the produ cts, i.e. whether th e pro ducts are su b stitut es or compl ements. Interesti ngly , we find that the empirical results are inconsistent with the rational framework. This inconsistency is explained by the effect of a desired “gift”. The results are important for theoreticians and practitioners who desire to develop efficient tools and innovative avenues for sales promotions
Original languageAmerican English
Pages (from-to)124-131
JournalModern Economy
Volume2
Issue number02
StatePublished - 2011

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