HOW would you react if someone offered you something for free? Before giving a cautious “it depends” reply, let me give you a specific situation. A close friend requested you to travel to another country to bring a well-packed gift to his business partner. It was packed in a beautiful wrap and you are too shy to ask your friend to open it for your scrutiny. To sweeten his request, he offers you a free round-trip air ticket, hotel accommodation, visa arrangement, and $1,000 as your shopping money. He claims he’s supposed to personally bring it to his business partner, but his busy schedule at home prevents him from doing that.
With the freshness of the case of Mary Jane Veloso who was found guilty of drug smuggling and is now awaiting her fate on death row in Indonesia, most likely you would politely decline the offer, even at the risk of ruining your friendship. Okay, fine, that’s an easy answer. But, would your answer be the same after five years when Veloso is no longer headline news?
Here’s another test case. You’re spending your lazy Saturday afternoon inside a shopping mall when an attractive young woman, who looks like Andi Eigenmann, approaches you with a sweet smile you can’t ignore. You smile back and she offers you a colorful flyer with a free P100 gift certificate and another one worth P200 but is for sale for only P70. The gift certificates can be redeemed from any of select establishments inside the mall.
Think quickly. Which one would you choose? The free P100 gift check or the one worth P200 but is for sale for only P70? Most likely you would choose the free P100 gift check. How can you argue with something offered for free, with no apparent strings attached?
Dan Ariely, the New York Times bestselling author of “Predictably Irrational,” (2010) says if you choose the free gift check, then you’ve done an “irrational behavior” because you ignored having a clear profit of P130. Ariely knows what he’s talking about when he did a similar social experiment in a Boston shopping mall and offered free $10 Amazon gift certificates and a $20 gift certificate for $7 to shoppers.
Ariely’s experiment showed that most people jumped for the free certificate and ignored the $20 value check sold for $7, even if it gives them an instant $13 profit. That’s the power of FREE (in capital letters) and how it influences consumer behavior, no matter how irrational.
I’m talking here based on my personal experience with my wife, who has that perfect tendency to buy packs of Magic Sarap™ because she wants to get one FREE plastic kitchen plate, even if we don’t want it in the first place. Is that rational behavior? Bonnie says YES, also in capital letters, as she believes that the price of Magic Sarap™, with or without the FREE plastic plate, is the same. And so why skip the FREE offer?
The irrationality is close to home. Our inventory of Magic Sarap™ is now close to 9,876 tons of MSG, nearly exceeding the annual requirement of all Chinese restaurants in Binondo. That’s where the problem lies.
Going back to our shopping mall experiment, what if we hire Juana Change (instead of Andi Eigenmann) to distribute the free gift checks? Would you still prefer the FREE gift checks over the instant P130 profit if you were to buy the P200 worth of gift check for P70? That’s another angle worth looking at. Remember, looks can deceive us, in the same manner that perception is the exact opposite of reality.
That’s how we do critical thinking. It is an essential ingredient for leadership success. When you do critical thinking, you possess an analytical skill that involves the ability to gather and interpret information for decision-making in a problem context.
Take a deep breath and remember all the irrational things happening to us almost every day. On top of my list is one major company that is willing to pay the post-seminar rate of P7,490 per person rather than beat our deadline of paying the early bird rate of P5,490 several days ahead of the public seminar. Another example—there is one major hotel in Makati who is making our life difficult by keeping us on the waiting lounge for at least 20 minutes as some snail clerks process my down payment for a reserved function room.
The sales executive in charge of my account claims that their accounting department would not allow their reception desk to use their official receipt to receive the payment of hotel guests. So that my blood will not boil too much, she would offer me a free juice drink that costs nearly P200 a pop.
Now, why are these people committing this apparent irrational behavior? The answer lies in some serious critical thinking.
Rey Elbo is a business consultant specializing in human resources and total quality management as a fused interest. Send feedback to email@example.com or follow him on Facebook, LinkedIn, or Twitter for his random management thoughts.