When I first began shaving at the tender young age of 16, I chose a Gillette razor. It seemed far cooler than my father’s buzzing electric shaver. Besides, the razor was dirt cheap and, even better, the blades in the package were "free." Twenty years later, I’m still shaving with a Gillette razor, although I estimate I’ve spent roughly $11,500 dollars on blades so far in my life. (The razors/razor blades marketing strategy is, of course, legendary. See also: printers, ink.)
Costs aside, whenever I find myself talking price-setting strategies with despairing executives, Gillette’s approach remains relevant. It is a fine representation of the idea of "extreme stickiness," somewhat similar to Microsoft’s regular releases of its newest, must-have operating system.
Yet, as we’ve all learned over the years, the notion of "free" is attractive only until you see what the paid version has to offer. The emotional response in our brain then kicks in and, from that moment, the only possible software solution to our operating system requires the purchase of the expensive software.
The way in which our emotions overrule our rational thinking was perfectly illustrated in a short study psychologists carried out with a random group of students. They offered a choice of two Amazon gift vouchers. The first, valued at $15, would be immediately effective. The second, valued at $20, required the students to wait two weeks before cashing it in. Brain scans revealed that both options triggered activity in the lateral prefrontal cortex—the area of the brain that generates emotion.
However, the possibility of getting that $15 gift certificate now caused an unusual flurry of stimulation in the limbic area of most students’ brains. This is the region of the brain primarily responsible for our emotional life, as well as the place where memory is formed.
The psychologists found that the more emotional excitement created, the greater the possibility of the students opting for the more immediate alternative. Of course, rationally, they knew that the $20 offer was the better deal but, as is often the case, emotions ruled.
The Gillette strategy is now everywhere. One need look no further than Apple’s iTunes store, which has hundreds of thousands of iPhone apps that can be downloaded for free. This is the Gillette 2.0 model. But this time around it no longer costs any money; the razor, so to speak, comes free, as do the blades. If you’ve ever played the computer game Penguins!, you’ll know what I’m referring to.
The purpose of that game is to help the "most adorable animals in the zoo" escape their keepers. This is achieved by earning points as you work your way through 80 levels of puzzles, navigating eight different zones in the zoo. You can do that for no cost whatsoever. There are no payment walls required to progress further. You can keep going until the penguins are free. There is, however, one wall that catches most dedicated players, and that’s the emotional wall. If you want to be recognized for your skill and expertise as a gamer who’s liberated those adorable creatures, you have to pay.
Only just last week, the New York Times published an article about the iPhone game Temple Run. Since being promoted on the Free App a Day website, Temple Run has been downloaded some 40 million times, with 13 million people playing it once a day. Embedded in the game are virtual stores where you can "buy" new characters with virtual coins. Now, if you want to speed up the process, you can pay real money. According to Natalia Luckyanova, one of the game’s inventors, the key to its success is getting enough people to be passionate enough about the product to be willing to pay.
Flurry, a company that specializes in analyzing mobile software, has estimated that 65% of the revenue generated in the iTunes app store comes from ostensibly free games. The revenue from the free games is substantial, estimated at about $2 billion a year.
So what is really going on here? Rationally, it just doesn’t make much sense. After all, why would you pay for something that is for all intents and purposes freely available? The answer to this, I believe, is what I call an emotional investment. (An alternate theory was presented in Chris Anderson's book Free: The Future of a Radical Price.) In the case of Penguins!, the persuading factor comes about when you realize that all those hours you’ve spent and hard work you’ve put into accumulating thousands of points doesn’t really amount to much. Not unless you’re happy to use them up buying a virtual blanket for a shivering penguin.
Bailing out at this stage of the game would be like driving 100 miles only to realize that you need to pay a $4.95 toll to reach the final destination, even if I offered you a free train ticket home. No, you’ll probably pay for the pleasure of saying you reached the end of something instead of just being in sight of it. It’s funny, irrational, illogical behavior. The students who chose to forego the better deal and opted for the immediate option understand it perfectly well.
[Image: Flickr user zzclef]
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Martin Lindstrom is a 2009 recipient of TIME Magazine's "World's 100 Most Influential People" and author of Buyology: Truth and Lies About Why We Buy (Doubleday, New York), a New York Times and Wall Street Journal best–seller. His latest book, Brandwashed: Tricks Companies Use to Manipulate Our Minds and Persuade Us to Buy, was published in September. A frequent advisor to heads of numerous Fortune 100 companies, Lindstrom has also authored 5 best-sellers translated into 30 languages. More at martinlindstrom.com.