[Pricing Nugget #027] Wrap a Low Value in a Voucher

Imagine you are about to launch a promotion, but you do not create a price-off campaign this time.
This time you do something special: You create a conditional promotion – your customers buy something and get something for free.

But how do you give the free item to them? Should you give it directly as a gift or as a voucher for later redemption?

Does it make any difference? In the end, your customer receives the same free gift.

We will find out today.

Now let's put ourselves into the shoes of your customer. 

You are about to buy a digital camera. You go to a store, and the seller offers you a camera, and when you purchase it, you will receive a USB Flash drive for free.

You think about your purchase intention. How likely are you to buy this camera and receive this gift for free?

Now imagine another situation. It is not a direct gift. It is a voucher that you can redeem for the gift. Almost frictionless.

Does it make any difference?

Okay, the next situation. It is not a USB Flash drive; it is an external hard drive, which costs almost three times as much as the USB Flash drive.

What does change? How does your purchase intention change?

Researchers looked into this question, and they found something exciting.

They found that vouchers break the connection between the focal product and receiving the gift. You buy the product, you receive the voucher, and then, only as a third step, you get the gift.

It is similar to you collecting points and miles in your frequent flyer program. You focus very much on the points and the miles and a bit less on what you can buy with them afterward.

And this break in the connection leads to customers paying less attention to the value of the free gift relative to the price of what they just have bought.

Therefore, customers who received a voucher are less likely to evaluate the value of the gift in light of the focal product. And this has some neat implications.

The researchers looked into four constellations. They either gave a direct gift or a voucher to the customers of either high or low promotional value and something happens that is not too surprising.

A high promotional value leads to a higher purchase intention than a low promotional value. 

Okay? But what else happens here? You see that the relative height of the bars switches.

That is because customers pay less attention to vouchers in comparison to direct gifts. 

This means if they receive a high promotional value, customers do not recognize it and do not appreciate it.

That is why the purchase intention is lower for vouchers compared to direct gifts if the promotional value is high.

But this also means if customers do not evaluate the value of the free gift in a low promotion value condition when receiving a voucher, customers do not recognize that the free gift is not so cool.

So, they are less disappointed about the gift and exhibit a higher purchase intention when the promotion value is low if they receive it as a voucher compared to a direct gift.

What did you learn? 

If you have a great promotion with a high promotional value, make it very salient to your customers that this promotion value was really high and give it directly as a gift.

If you save money and your promotional value is rather low, hide it in a voucher, this makes it less likely for our customers to be disappointed.