When to use vouchers vs free gifts for promotions

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📝 Intro

You’re planning a special summer promotion. Anyone buying a pair of your sunglasses will get a free cleaning kit.

You’re debating between two options on how to set the promotion up:

• Buy the $160 sunglasses and get a free cleaning kit

• Buy the $160 sunglasses and get a voucher for a free cleaning kit

While these two might seem identical, science says the latter is the most effective at increasing sales. Here’s why.

P.S.: When you’re running a promotion try to time it around a big event or special day - it can increase sales up to 48%.

Want hundreds more insights like these? Explore all Science Says insights here.

Use vouchers for low-value gifts and direct gifts for high-value freebies

Topics: Promotion | Pricing
For: B2C. Can be tested for B2B 
Research date: April 2020
Universities: Stanford University, National University of Singapore

📈 Recommendation

For promotions in which you give customers a free gift along with the main product they’re buying:

• Offer them a voucher for the gift if the gift is relatively low-value compared to the product (e.g. Buy a laptop and receive a voucher for a screen cleaning cloth)

• Give the gift directly if it has a relatively high value compared to the item bought (e.g. Buy a bottle of shampoo and receive a free bottle of conditioner)

People will be more likely to buy.

🎓 Findings

• When a low-value gift is offered alongside a product (e.g. get a glasses case when buying sunglasses), people are more likely to buy the product (sunglasses) if the gift is offered as a voucher instead of a direct gift. If the gift has a similar value as the main product, offering it directly increases purchases.

• As part of a series of 5 online and lab experiments and a field experiment at a small pastry shop in China, researchers found that:

  • When people were buying a Sony camera:

    • Purchase intentions were 9.4% higher when they were directly offered a high-value gift (1TB hard drive)

    • Purchase intentions were 8.7% higher when given a voucher for a low-value gift (4GB flash drive) compared to when given the flash drive directly

  • 61.4% more customers ordered a cake when offered 3 pieces of chocolate as a direct gift, compared to as a voucher. When only 1 piece of chocolate was offered, sales were 52.4% higher when the chocolate was given as a voucher, instead of directly

  • When shown a high-value gift (4 pieces of Godiva Truffles worth $9 for a $38 board game), people’s intentions to buy were 19.3% higher when offered the truffles directly, as compared to a voucher for the truffles. When customers were offered a single chocolate worth $1, purchases of the board game were 37.8% higher when a voucher was given for the chocolate.

• The effect disappears when people are directly told the value of the gift or they think about the price of the gift being offered.

🧠 Why it works

• We judge the value of a gift by comparing it to the product we’re purchasing. For example, a gift of a $20 wine bottle can make a deal for a $100 set of wine glasses much more appealing, while the same $20 gift likely wouldn’t feel much if we’re buying a wine fridge for $4,000.

• When a gift is offered to us directly, it’s easier for us to compare its value with the product we’re paying for. This makes low-value gifts a lot less appealing.

• When a gift is offered to us as a voucher, its value gets decoupled from the main product we’re buying. The voucher acts as a mental buffer when we’re comparing the costs, making us less sensitive to the actual value of the gift.

• However for high-value gifts, vouchers reduce the excitement of receiving something valuable, reducing purchase likelihood.

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✋ Limitations

• The research focused on vouchers for free gift promotion bundles (buy product A and get product B for free). It’s unclear what happens if the voucher offers monetary value (e.g. $20 store credit) or discounts (e.g. 20% off coupon for your next purchase). In that case, the value of the voucher is clear no matter how it’s delivered.

• The study focused on moderately priced products - the effect might be different for luxury goods or for services.

• The research also considered price as the only source of value people use to judge the value of a gift. Other factors like exclusivity, branding or celebrity endorsement may also play a role in perceptions of the value of a gift (e.g. a limited edition, yet cheap gift might still be considered valuable).

• The experiments did not measure the redemption rate of the vouchers for the free gift. It’s likely that not all vouchers for a free gift would be redeemed, making it cheaper to run such a promotion.

🏢 Companies using this

• Giving free gifts directly is still relatively common for both high and low value gifts:

  • Lancome offers a high value gift set of sampler items on purchases over $85

  • Subscription services, including magazines and websites frequently offer free gifts directly on purchases of subscriptions. For example, Time magazine offers a high-value gift of a leather carry bag on subscriptions longer than 1 year

  • Furniture retailer Neatlane incorrectly offers low-value free gifts (like an air freshener worth €20) directly on any furniture purchase made on their website

• Though less common, some brands do offer vouchers for free gifts, but don’t seem to do so based on the value of the free item.

  • Beauty retailer Sephora offers members of its Beauty Insider loyalty program a redeemable voucher for a gift bundle on purchases above $25 during a customer’s birth month

  • Retailer Target runs promotions offering gift cards (redeemable for any item), against purchases of select products

  • The Disney Store often runs promotions offering online codes for small free gifts (e.g. a plushy or keychain) after spending a certain amount

Skincare brand Estee Lauder offers a promo code for a travel mirror and body cream on purchases of $150 from their AERIN sub-brand

⚡ Steps to implement

• If you’re starting a gift-with-purchase promotion, try to understand whether the gift you’re offering would be seen as high or low value to your customers. If you’re unsure how valuable it’s perceived (e.g. because it’s branded or exclusive), you can survey your customers.

• If the gift you’re offering is seen as low-value, offer it as a voucher or promo code, instead of giving it directly (e.g. buy a coffee maker and receive a voucher for a sampler of coffee pods).

• If the gift you’re offering is high-value, then give the gift directly (e.g. buy a coffee maker and receive a free milk frother).

🔍 Study type

Lab experiment, online experiments, and field experiment (promotion offered to 2,020 people and availed by 89 offering 1 or 3 pieces of Ferrero Rocher chocolate on purchase of a cake at a small Chinese pastry shop)

📖 Research

Hiding Gifts Behind the Veil of Vouchers: On the Effect of Gift Vouchers Versus Direct Gifts in Conditional Promotions. Journal of Marketing Research (April 2020)

🏫 Researchers

• Yu Ding. Stanford University.

• Yan Zhang. National University of Singapore.

Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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