Free gift or discount: which works better?

1 Put the costs side by side, honestly

A $10 discount costs you $10. A gift that sells for $10 in your store costs you only what you paid for it, say $3, plus perhaps some packaging. At the same value to the customer, the gift is much cheaper for you.

The second advantage: your prices stay where they are. A customer who gets 10% off today expects it again next time.

2 Use the power of zero

Free works harder than the math suggests. In an experiment at MIT, two chocolates each got one cent cheaper, so the cheaper one suddenly cost nothing. Its share shot up, even though the price gap to the better chocolate hadn't changed.

For you that means: make the gift truly free. A sample for $0.99 throws that effect away.

3 More of the same can beat a percentage off

In a field test, a store sold a hand lotion for 16 weeks, alternating between "35% off" and "50% more free". The bonus pack sold 73% more units, even though the discount was worth slightly more. The researchers' explanation: shoppers compare the numbers 50 and 35, not the value behind them.

The effect disappeared with small numbers (10% off versus 11% more) and with pairs that are easy to convert, like 50% off versus double the amount. For consumables the test is still worth it, for example "50% more" instead of "33% off".

4 For indulgences, lean toward the discount

Whether shoppers prefer more product or a lower price also depends on what it is. In five experiments with food, people chose the bonus pack for sensible products and the price discount for treats. More chocolate is hard to justify, a lower price isn't.

The experiments used food only. If you sell sweets, wine or similar, test the discount first. For sensible foods like tea, lean toward the bonus quantity.

5 Don't give away your main product

Something labeled "free" can lose perceived value. In experiments, willingness to pay for a product dropped after it had been described as free in a bundle. Give away your bestseller and you teach customers that it's worth less than you charge.

Samples, travel sizes, accessories or a new product you want people to try work better. Add the regular price and the reason, for example: "Free with your order: our new hand cream in travel size, so you can try it."

6 Set the threshold one item above where many orders land

A gift with orders over a set amount targets the whole cart; a gift tied to one product only targets that product's quantity. If many of your orders fall between $40 and $50, a threshold at $55 is one more item away for them, not three. Increase average order value shows how to find that point in your order data.

Also set the gift to be given only once per order. Otherwise a doubled cart gets two gifts.

7 Make sure the gift actually arrives

This is where a promotion can easily fail. Shopify's Buy X get Y makes the gift free, but according to Shopify's Help Center the customer always adds it to the cart manually; it is never added automatically. Customers who miss the note get no gift and email you afterward.

8 Test both and measure gross profit

Research only points the way. Test it in your store: run the gift and the discount for a week each, alternating, like the field test above, then compare order value, number of orders and gross profit per order. Revenue alone is misleading: the discount lowers revenue on every order, while the gift's cost shows up only in your cost of goods.