The High Cost Of Free

This post was written by Mengmeng Wang, Contributing Writer on October 5, 2008
Posted Under: Psychology of Finance

Last Wednesday, in the quest for free shipping, I found myself frantically clicking through J.Crew’s website, looking for anything I could buy to push my total over the 150 dollar mark. I ended up spending an extra 60 dollars on something I didn’t need or even really want in order to save ten bucks on shipping. Did it make sense? No. Did I know it didn’t make sense? Of course. But I did it anyway—I couldn’t control myself.

Professor Dan Ariely writes in his book Predictably Irrational that while the difference between one cent and two cents is insignificant to us, the difference between one cent and FREE is much more dramatic. When Amazon began providing free shipping on orders more than twenty-five dollars, customers began spending disproportionately more—much more than they were saving on free shipping—to meet the twenty-five dollar threshold. Amazon France, however, reduced shipping costs to the equivalent of 20 cents and never experienced this spike in purchases—that is, until it too decided to provide shipping for free.

According to Professor Ariely, the word FREE blinds an otherwise rational person from assessing the true value of a purchase and often makes something seem much more valuable than it is. When offered free shipping, we feel the need to take advantage of it, even if it ends up costing us more than we intended to pay.

J.Crew seems to be banking on this very irrationality in its online shopping sales. From last Monday to last Wednesday, I received three separate emails from J.Crew telling me to take advantage of the limited time free shipping offer. I finally did, but I can’t help but wonder if it’s me who was taken advantage of.

  • Woah, free blinds otherwise rational people. That's interesting. I think I'll try and mentally replace "FREE" with "$.02" the next time I'm tempted by free shipping. Good read. Thanks!
  • marc matsumoto, head marketing
    Great idea Jason!
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