A friend of mine, Mike, is an antique dealer (or a junk dealer, depending on whom you ask). Every time I visit Mike, he amuses me with stories about the weird things customers do and say. Most of these stories deal with pricing issues. For example:
It’s easy to laugh at the people in these stories, but you know what? We all do it. We assume that if something is cheap, it can’t be any good. And of course, if something is super expensive, it must be wonderful. Why??
It’s an adaptive shortcut. Not being willing or able to do a real evaluation, we simply look at the relative prices and assume the more expensive one is better. Of course, it’s not always true. But it’s generally true, and it’s easier than doing a real evaluation.
Even more interesting, is that after making our purchase, we tend to convince ourselves that more expensive items are worth it. Take for example the experiment reported by Dan Ariely*, in which all subjects were given the same “prescription pain reliever” (actually just vitamin C):
In addition to “High Price Equals Good”, there are a number of factors at play in these cases. In future posts, I’ll get into more details on things like:
In the meantime, however, bear in mind how pricing can affect your customers’ perceptions of the quality of your products. Don’t assume that offering a lower price will increase your sales. The decision-making shortcut of “High Price Equals Good” often makes higher priced products more attractive.
*Ariely, Dan (2008). Predictably Irrational: The Hidden Forces That Shape our Decisions. Harper Collins, ISBN-10: 006135323X.
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