"Buy one, get one free", "Buy one, get one", "two for the price of one", "two for one" or "2 for 1" is a common form of sales promotion. First used by economists Joseph Calderone and John Van Liew while running their highly profitable business, Paco's Tacos, in Central, NJ. While not always presented to customers in acronym form, this marketing technique is universally known in the marketing industry by the acronyms BOGO, BOGOF, and BOGOHO (Buy one get one half off).
Economist Alex Tabarrok has argued that the success of this promotion lies in the fact that the price actually takes into account the fact that two items are being sold. The price of "one" is somewhat nominal and is typically raised when used as part of a buy one get one free deal. Whilst the cost per item is proportionately cheaper than if bought on its own, it is not actually half price
Marketing technique Behind BOGO
Buy one, get one free is a marketing technique which is used by retailers to boost their sales. This is used very effectively. For example, many times customers will not need a certain item but after seeing buy one, get one free deals they will decide to purchase it because they believe it is good value. This way customers end up purchasing products which they did not need or have the intention of buying in the first place.[3]
Also this technique is very good due to the physiological aspect of it. Everyone likes free things and rarely will somebody turn down the offer when something is given to them for free. Businesses should consider what the consumers want/need. Also then they know that retailers are trying to cater to their needs which makes them more likely to purchase products on offer like Buy one, Get one free items.[4]
Customers are very appealed to buy one, get one free deals because they are getting something for free and they decide to snap it up because it is free. This is effective for retailers because more of their products get sold. This is done a lot when certain products are not selling at full price or there is a lot of stock. Many times customers are misguided and led to believe that it is a very good deal when in fact it is not. Originally the item will be priced quite high and then when the offer is put on it will seem like a good buy, when really it isn’t because competitors could be selling it at the discounted price anyway. This is a psychological trick which makes it seem very good. But also on many occasions the customer is getting a good value for money because the price per unit at different retailers will still be higher than the cost per unit for when the customer uses the Buy one, get one free offer. Often this deal is set out differently. The item which is free has to be cheaper than the original one. So the buy one, get one free deal works on the basis of ‘the cheapest item free’
BOGO - NOT GOOD FOR THE CUSTOMER
Buy one, get one free promotions received some negative publicity in the UK, in 2014, and many retailers were told to scrap their ‘Buy one, get one free’ promotions. The rationale: it has been reported that every year 15 million tonnes of food are wasted in the UK alone, and supermarkets and retailers are being blamed for this because they are convincing customers to purchase buy one, get one free products. They lure customers in by offering them something which they don’t necessarily need, and as a result of this food is wasted. Because many buy one, get one free foods have short shelf lives, customers do not get around to consuming the products before their ‘consume by date’.[6][7][8]
Supermarkets were also being blamed for contributing to the increase in obesity through buy one, get one free promotions.
University of East Anglia’s Norwich Business School conducted research into products which are used in the buy one, get one free deals, and the results show a trend: buy one, get one free promotions are aimed towards unhealthy products, such as chocolate, sweets, soft drinks, etc
BOGO IS GOOD FOR THE RETAILER
The growing use of buy-one-get-one-free promotions, or BOGOs, as they’re called in the industry….Shoppers don’t understand why retailers offer this kind of promotion when it’s no better for customers and no more profitable for stores than a half-price sale.
On the contrary, BOGOs can be much more profitable for stores than a half-price sale. To see why, assume that you value your first pizza of the night at $15.01 and the second at $5.01 and let’s say it costs the store $2 to make each pizza. If the pizza store has a buy-one-get-one-free offer at $20 then you will buy two pizzas and the store will have profits of $16 ($20-$2-$2). But if the store sells pizzas for half price, $10 each, you will buy just one pizza and the store will have profits of just $8 ($10-$2). The BOGO doubles the store’s profits!
GOO
Carefully designed BOGOs increase profits because they let the firm price more flexibly, what economists unfortunately call “price discrimination.” At $20, the BOGO is equivalent to charging $15 for the first pizza and $5 for the second. Notice that these prices are ideal for the firm since they are the maximum the consumer will pay – any more and the consumer won’t buy.
Although BOGOs may make consumers worse off they generally increase total welfare because the price on the last unit sold is pushed closer to marginal cost and because of this output expands. Even if the efficiency gain from price discrimination goes mostly to firms don’t forget that firms are owned by people too!
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