What is the price we pay for 'free'?

The title sounds like an oxymoron but really, there is a “price” for the things we allow ourselves to receive for free.

There is a thrill in saying, “Libre ‘to!” (“I got this for free!”) We feel we got ourselves a good deal. We imagine ourselves to be in a better state compared to where we were prior to receiving the free stuff. But are we?

Let’s look at some examples.

1. Interest-free 12 months to pay on your credit card. However, when you ask the salesman, “What’s the difference if I pay the entire amount in cash?” Usually, the answer is, “Sir/Ma’am, you get a cash discount of 5 percent on the total amount.” So is it free? 

2. Free donuts to those who joined the fun run. But the line is like a long snake that it might take you 45 minutes to an hour before you finally get your free donut. What is the cost of your time lining up for an hour?

3. Free pica-pica in a bar. But if you check out the price of one bottle of beer, it is 20 percent higher than the bars down the block. So are your peanuts and chips in this bar really free? 

4. Free lunch and workshop on investing. After an hour of presentation over sumptuous lunch, you get bombarded with so many products to buy, you somehow end up getting one you don’t really need because you knew the cost of that buffet lunch you gladly ate. 

5. “You won a television set! Come to our office to claim your prize!” Then you arrive there with a number of co-winners. You all listen to this seminar on how great their products/services are and you are very lucky because you are among the chosen ones who can buy them at discounted prices… before you can get your free television. So is the television really free? The more basic question is, “Did you even join a contest/raffle where you can win?” 

6. Free use of this and that app. But before we can use the app, we have to give information like email address, etc. Then while we use the app we share our information such as spending habits, etc. Do you know the cost of gathering all this information from consumers like you? 

7. Coke Zero. You take the zero calorie version of your favorite drink in order to lose weight. Never mind the side effects of the artificial sweetener such as dizziness, migraines, insomnia, change in heart rate, etc. What if I tell you that even weight gain is listed as one of the side effects? Well it is. 

In Behavioral Economics, we study the principles behind the psychology of money and one of them is this so called free.

Free is the invisible price that we pay using our time, effort, attention, information, hope and in some cases even money.

But free is such a powerful marketing tool even for those who can easily afford to buy things. The price of zero is psychologically much more attractive than any other price. It excites you irrationally like no other number or huge discount can do!  You feel that there is no downside because you didn’t pay anything. It gives you a thrill to get something, enjoy utility without cost (or so you think). It makes you go to a restaurant, fall in line for hours, listen to sales pitches, give your information and even pay for something you don’t need in order to get something else for free.

So the next time you are faced with a decision whether to avail of something for free, ask yourself the question, “If this weren’t free, if I had to pay a relatively lower price, would I still buy it?” If the answer is no, then maybe you should pass up on that chance to get it for free. This will free you from false hopes and expectations, use of your resources such as time, storage space, etc.

Cheers to discerning consumers! 

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2. I will give a talk at the Alumni Connect on March 25, 2017 at the Decagon Silver City. 

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Rose Fres Fausto is a speaker and author of bestselling books "Raising Pinoy Boys" and "The Retelling of The Richest Man in Babylon" (English and Filipino versions). Click this link to read samples – Books of FQ Mom Rose Fres Fausto. She is a behavioral economist, a certified gallup strengths coach and the grand prize winner of the first Sinag Financial Literacy Digital Journalism Awards. Follow her on Facebook and You Tube as FQ Mom, and Twitter & Instagram as theFQMom.

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