Friday, June 15, 2012

Free food!!!

The word "free" has become some sort of fashion in the last decade. It is used in various advertisements as a way of attracting customers. We have all been to the supermarket and bought the occasional "buy one get one free" item. I noticed that the number of these items has increased exponentially during the last three years as a way of attracting buyers in the midst of the crisis. People are attracted to this word. They want the "free" item, they feel the need to possess it because it is, afterall....free!

I noticed, that most of the traffic on my blog was directed to the post entitled "Free Economics". This verifies to an extend the attraction that people have to this word. But is there any item or service out there that is provided for free? I have several examples that I would like to share with you.

When I was a student at UVA, I noticed several kiosks operated by students promising "free t-shirts". Of course, I approached with the intention to satisfy my desire of owning the free item. Upon approaching, I was asked to fill in an application form for a credit card in order to be entitled to the "free" t-shirt. I am ashamed to admit that I did fill one in and I was awarded with a not so impressive t-shirt, which I ended up paying tenfold in interest charges when I used the credit card for purchases. Lesson learnt, the t-shirt was not really free.

The second story is also from my college years. When it was time for me to graduate, I needed to sell my belongings that could not fit in my suitcase. I had if I remember correctly a music deck (CD player, with a double cassette recorder, and NO I am not THAT old) and an independent subwoofer speaker. I advertised the items on a local website and I priced the music deck at $100 and the speaker at $50. I waited for a week but nobody replied to my ad. Then I thought to try another approach. I advertised the music deck for $150 and I threw in the speaker for FREE. Mind you, I advertised on the same website. The items were sold the same day! Lesson learnt, the speaker was not free.

Do you need a third example? Kia Motors USA in 2006 launched a buy one get one free campaign for their KIA Rio model. People could buy a KIA Rio at retail price (which meant no dealer discount) and they were entitled to a second Rio for free. But KIA committed the buyer to use approved dealerships for service and any other maintenance that the car needed, which really translated into elevated maintenance prices. In the end the free Rio ended up costing the buyer more than the alternative of paying a discounted dealer price and using an independent cheap mechanic for maintenance. Lesson learnt, the car was not really free. I have many other examples but I could go on forever.

My first university economics professor Kenneth Elzinga used to say that "there is no such thing as free lunch". Until someone proves otherwise I have no reason to doubt that. So the next time you see the word "free" advertised, do not rush into the purchase.

The item might not be as free as you think.... 


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