Wednesday, April 24, 2013

The Salesman’s Guide To Manipulating Your Friends

A common convention used when pricing a product is to offer 3 different prices - a premium option, a normal option, and a budget option. Even if you would prefer to offer just one product at one price, the three tier option is usually better.

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Why? Because when it comes to making decisions based on prices, people are easily manipulated. Here is a good example that summarizes an experiment from the book Priceless:
“People were offered 2 kinds of beer: a premium beer for $2.50 and a bargain beer for $1.80. Around 80% chose the more expensive beer.
“Now a third beer was introduced, a super bargain beer for $1.60 in addition to the previous two. Now 80% bought the $1.80 beer and the rest the $2.50 beer. Nobody bought the cheapest option.
“Third time around, they removed the $1.60 beer and replaced it with a super premium $3.40 beer. Most people chose the $2.50 beer, a small number the $1.80 beer and around 10% opted for the most expensive $3.40 beer. Some people will always buy the most expensive option, no matter the price.”
As the experiment shows, people often have a preference for the middle option, irrespective of quality or price. Although we tend to think of ourselves as making decisions by comparing the cost of a product to its quality (or our willingness to pay), we don’t always do so in practice.

For the rest of the story: http://blog.priceonomics.com/post/48711273544/the-salesmans-guide-to-manipulating-your-friends

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