Why free offers are more powerful than discounts
How restaurants can personalize free offers to increase loyalty
Chipotle gained a guest for life the first time I tried its burrito. I was visiting friends in Chicago in 2004, and I stopped into Chipotle hoping for an inexpensive, filling lunch. Maybe the manager could tell I was working at a nonprofit at the time, because as he handed me the burrito he said, “This one’s on me.”
I felt such an incredible goodwill toward Chipotle because of that free burrito. It tasted more delicious. It got me to love the brand, and I wanted to have another burrito in the future that I would pay full price for. I wanted to tell all my friends they needed to try this brand.
If I had gotten my order at a discount, it would not have inspired the same level of devotion. And it turns out, this is a textbook case for why restaurants should consider offering freebies rather than discounts.
In his book, Predictably Irrational , Dr. Dan Ariely explains that offering something for free has a powerful effect on human behavior:
“Most transactions have an upside and a downside, but when something is FREE! we forget the downside. FREE! gives us such an emotional charge that we perceive what is being offered as immensely more valuable than it really is.”
For free things, we wait in long lines. We take swag from an event booth. We will go out of our way to acquire items we don’t really need because the perceived value of free is so high.
However, the same isn’t generally true for discounts. When we receive a discount on an item, it affects our perceived value of the item and the brand. If Chipotle offered half off burritos, a guest might think the brand is still making a profit off the discounted burrito and expect that it should always cost less. Discounts change the expectations of the price of a burrito in a way that a free offering does not — I certainly don’t expect free food every time I visit a restaurant, so it feels special when it does happen.
Personally, I also have to respect the confidence of giving away your food for free — you are saying your food is so good that someone will come back and pay full price.
Giving away your entire menu for free to anyone is not exactly a good business model. But identifying the right guest candidates and sacrificing a few dollars in food cost for loyalty will likely be worth it down the line. There are several tried-and-true methods to leverage free food in exchange for valuable customer data: free fries for signing up for a loyalty program, a free drink for leaving an online review, or a free dessert for agreeing to receive text offers.
When your brand uses Olo Engage you already have robust guest profiles you can use for personalization. What are some creative ways to tap into that psychological appeal of free to increase business without giving your whole menu away every week?
Given the tight margins in the restaurant industry, it may feel daunting to give food away for free — it may feel like money is walking out the door. However, you are in control of the free offer: what to offer, how long it lasts, and who can receive it. Keep it to a value you feel comfortable with — I imagine very few restaurants are giving away free steaks.
Remember that free is a powerful tool. In return for the free item, you are gaining guest insights that can help you run your business better. And, you might even gain a guest for life.
Transform your guest experience today.