The behavioral economics behind free gas

With high gas prices, you might have noticed promotions for free prepaid gas cards when you buy some product. Like a Callaway golf club. A Comfort Inn hotel room stay, a lodge stay on Big Bear Lake, or one booked through Expedia. Or a new Chrysler car with of three years of gas guaranteed at $2.99. Assuming these prepaid cards aren’t coming at a massive wholesale discount, companies could just offer a simple cash reward, or even a free prepaid generic Mastercard  or Visa that would be good anywhere, not just at gas stations. So why play up gas?

It’s a classic mental accounting trick. Most Americans have a transportation budget, which has been blown over the past year by $4 a gallon gas. People have a hard time moving money from one mental account to the other, say from clothing or dining out to gas. The prepaid cards give them a way to restore the solvency of the transportation account without upsetting their other budgets. Straight cash would be more fungible physically, but less fungible mentally.

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  • Anittah Patrick

    As a marketer who has swapped out free gas cards as a promotion over free iPods, you are correct in that the perceived value of the free gas in the consumer’s mind is north of that of cash. $4 of gas is worth $5 in cash (this delta has not been subject to extensive testing).

    That said, there are also calculations regarding breakage and cost-of-goods that factor into any marketer’s campaign forecasting. When launching a premium-based marketing campaign, some of the variables that come into play are:

    - Conversion (which to your point is higher for goods of high perceived value; gas during summer travel months is always in the marketer’s toolkit)

    - Cost of incentive

    - Breakage

  • Jan

    gas is perhaps considered another currency nowadays thats why prepaid gas cards are very much in demand.