A Discount May Devalue a Product More Than a Giveaway

Consumers who were offered free bread sticks as a promotion from a pizzeria said they'd be willing to pay $5.06, on average, for them once the promotion ended, only slightly less than the amount consumers were willing to pay when there had been no promotion, say Mauricio M. Palmeira of Monash University in Australia and Joydeep Srivastava of the University of Maryland. By contrast, people who were offered the bread sticks at a discounted price of 50 cents were willing to pay just $2.76 once the promotion was over. The findings suggest that a discount promotion may devalue a product in consumers' minds, whereas a free promotion offer may not devalue a product at all.