The Cost of Free

For those unfamiliar with behavioral economics, it is based on the premise that people don’t always make rational decisions when it comes to their finances.  This is critical to alcohol tourism, since the companies selling the alcohol make financial decisions which affect us, the consumer and traveller.  Unfortunately, we have found that some businesses haven’t thought things through vehttps://i2.wp.com/www.neurosciencemarketing.com/blog/wp-content/uploads/2008/07/maximum-wine-enjoyment.gifry well.

In a perfectly rational economic model, businesses should charge for a tasting.  They are offering a service for a fee.  Your decision to make a purchase should be, in a rational mind, independent of the fee for tasting.  If you like the wine, you buy the wine, independent of the fact that you paid for a tasting fee.  This would also discourage people from ‘mooching’- taking a free tasting and not making a purchase.  As mentioned, though, people aren’t perfectly rational.  There are two ways businesses can take advantage of this: using the sunk cost fallacy and reciprocity.  Mooching is also a fallacy when it comes to free offerings.

The sunk cost fallacy is often paraphrased as “in for a penny, in for a pound.”  Alcohol destinations can use this to their advantage, and everyone ends up happy.  Those establishments which charge for a tasting fee which is waived if you make a purchase use the sunk cost fallacy.  You do the tasting, which normally costs $5.  If you buy a bottle of wine, the fee is waived.  You’re already in for $5, but if you buy the bottle, it’s like you got $5 off the cost of the bottle.  You’re happy because you got a discount and the winery is happy because they got you to buy their wine.

Reciprocity is the idea that people return favors.  When Hare Krishna would give people a flower in airports, people would often give them a donation, even though they almost immediately discardeBold Rock Ciderd the flower.  The flower therefore had no value to them, so why did they make a contribution?  It’s because of reciprocity.  On this trip, Bold Rock Cider and the Vermont Spirits Distilling Company used this to happy effect- they give a free tasting, creating a condition of reciprocity.  We feel indebted to them, so make a purchase.  We win by getting a free tasting, and they win by selling their liquor.

Why doesn’t every alcohol business do this?  We have encountered more wineries in recent years that charge a fee for tastings whether you buy their wine or not.  This leads us to ask, are they in the wine tasting business or the wine selling business?  If they want to sell wine, using sunk cost and reciprocity would work to their advantage.  Maybe they are trying to fend off moochers.  These are alcohol tourists who just hit free tastings and don’t make a purchase.  While such people must exist, experiments show they are rare.  When students are allowed to take any amount of free candy they like, they always moderate their consumption.  It is perceived as a shared resource, so they don’t take all of the candy.

In short, wineries, breweries, and distilleries of the world: offer free tastings (best) or waive the tasting fee with a purchase (good).  You will have happier customers and you will sell more stuff.  And we will say nice things about you on our blog.

Alcohol Tourists

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5 thoughts on “The Cost of Free

  1. Pingback: More Breweries, Less Wineries | Alcohol Tourism

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  3. The clear problem with free tastings is there are groups of people who resist the power of reciprocity, and who will consume sufficient free product to put a serious dent in your budget. A small tasting fee eliminates the moochers. In more out of the way places, breweries and wineries can get away with free tastings, but once your area becomes known as a destination for alcohol touristing, you have to charge. Here in Santa Barbara, nearly all of the wineries will waive the tasting fee if you buy at least one bottle per taster.

    • Ted, thanks, I agree entirely. Moochers suck, and they become more problematic in popular areas. I have no objection to having to buy a bottle of wine to have the tasting fee waived. Unfortunately, in Georgia, much of the south, and even some parts of Oz, the policy is that a tasting fee is charged regardless of whether you make a purchase or not. I find this to be quite repugnant. Sounds like Santa Barbara, as popular as it is for wine, is more civilized than the parts of the country we frequent!

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