"Offering items for free is a marketing principle that implements the zero-price effect, which, according to Buyonomics, means people place an increased value on a product priced at zero. Despite the fact this shopping strategy can cost you, most consumers feel that when something is free, there's little risk attached to it meaning they don't need to do a cost-benefit analysis to decide if the item is worth buying."
"Of course, savvy buyers will understand that Verizon's "free phone" initiative is a marketing gimmick, much like how retailers use odd-even pricing to influence consumer spending habits. So, before you rush out to your local Verizon store for a "free phone," it's crucial to know what you're really getting into before you sign on for the deal. Most notably, the free phone from Verizon is only available with stipulations that lock you into specific, typically higher-cost, phone plans for an extended period of time."
The zero-price effect leads people to assign extra value to items offered for free, reducing perceived risk and bypassing cost-benefit analysis. Verizon promotes free phones that appear attractive because consumers avoid weighing true costs. Qualifying typically requires new-customer status or trading in/upgrading an Apple, Google, Samsung, or Motorola device that has an active account in good standing. The new phone selection may be limited by price caps, and enrollment in specific, often higher-cost phone plans is required. These promotional terms can lock customers into longer, more expensive service commitments, so individual cost analysis determines overall value.
Read at Money Digest
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