Final answer:
A premium is an offer of an item or service at a reduced price or for free, intended to encourage purchases. It is commonly used in business as a promotional strategy.
Step-by-step explanation:
An offer of an item of merchandise or service at a reduced price or for free, used as an incentive to encourage purchase, is called a premium. Such offers are a common promotion strategy in business to attract customers and boost sales. A great example is when a company offers a money-back guarantee, which serves as a promise of quality and encourages customers to make a purchase, even if they cannot directly see the product, as with online or catalog sales.