Why "Buy One Get One Free" Is Usually A Bad Deal
Recently, I read about a promotion from a home builder in San Diego where consumers could buy a 4000 square foot house for $1.6 million and get a smaller home by the developer valued at $400 thousand for free. This sounds like a fantastic deal, but I am always wary of any promotion labeled with "buy one get one free", and here is why.
Oftentimes, "buy one get one free" ends up being "buy two at the regular price". For example, I often see "buy one get one free" ads for orange juice at the supermarket, but the first box always costs over $5.00. At the same time the juices not in the promotion are selling for $2.50 to $2.99 a box. So basically, the markets have priced the free item into the price of the first item. In some stores they do cut the price in half when you just buy one, but in most supermarkets I have gone to if you did not grab the second box of juice you would be overcharged for the first box.
Another problem with buy one get one free is that often times you do not need the second item. Suppose that I only consume one gallon of milk every two weeks. If I were tempted into buying a second gallon in a buy one get one free promotion, then the second gallon would go bad before I have time to consume it. That creates waste instead of savings. In the case of getting a second home for free, the buyer has to pay property taxes on the second home and maintain it, and those things certainly are not free. Basically, if there is no need for the second item, there is no point in buying it even if it were "free".
In the case of the San Diego developer, so far they have received one offer on their expensive luxury mansions, but the buyer does not want the cheaper house for free. Instead, he wants the value of the smaller home deducted off his purchase price so if the developer agrees he could purchase the larger home for $1.2 million. I think this guy is quite wise because instead of being liable for poperty taxes on two homes valued at $2 million, he will only have to pay taxes on one property he purchased for $1.2 million. He saw right through the marketing of "Buy One Get One Free", and I think he will really be getting a deal.
Ultimately, it is up to you to see how much you need and how much you are willing to spend. Being aware of the regular price of things also helps you in determining whether a buy one get one free promotion is truly a great deal. Do not be suckered in by the word "FREE"!