Priceless by William Poundstone
Pounds home the lesson that humans fail at absolute pricing and rule at relative pricing. Humans also are subject to many many subconscious prompts which can drastically alter the price that we put on something.
Poundstone needs to follow up with a book on defensive purchasing as we're left with very few defenses against the onslaught.
With sixty PhDs among it employees, quite a few in physics, SKP (Simon-Kucher and Partners) has a reputation as the rocket scientists of pricing.
The old jar contained 18 oundes; the new has 6.3. The reason, of course, is so that Skippy can charge teh same price. That dimple at the bottom of the peanut butter jas has much to do with a new theory of pricing, one known in the psychology literature as coherent arbitrariness. This says that consumers really don't know what anything should cost.
They presented ... students with the hypothetical case of a young woman who said she contracted ovarian cancer from birth control pills an dwas suing her health care organization. Four groups each heard a different demand for damages (see below). The mock jurors were asked to give compensatory damages only.Demand Award 100 990 20,000 36,000 5 million 440,000 1 billion 490,000
Dan Ariely traces some of his research to his first experience in a pricey chocolate shop. Before him was an array of incredibly beautiful truffles with equally incredible prices. "I was thinking about what I wanted and I realized two things. One was that I quickly adapted to the level of prices. I didn't think about how much chocolate costs in the supermarket. The other thing was that I was very susceptible -- willing to take whatever suggested price the store was going to tell me ws the right price to think about.
Ariely was serving the Israeli military when a magnesium flare, used to illuminate battlefields at night, exploded near him. he received third degree burns over 70 per cent of his body. Fro the next three years, Ariely was covered in bandages and largely immobile. His treatment required regulare replacement of the bandages. ... He concluded it was better to pull gradually, for the pain to be less intense yet of longer duration. One can become adapted to slow, steady pain. ... He had little luck in convincing his nurses of this. They had a different perspective. It hurt them, too, to see patients suffer, and they preferred that this distasteful part of their work be accomplished quickly.
Wine and fancy chocolates are popular gifts in part because it's hard for the recipient to guess how much the giver paid.
Hardly anyone gets upset when supermarkets raise the price for yeast -- or other infrequently purchased items like gourmet pasta sauce, pomegranates, goat's cheese, or freshly-squeezed orange juice. There's an opportunity to make some margin back on those items. That's because customers can't remember what they paid last time and don't otherwise have a precise notion of what these items should cost.
Upper middle class consumers are angry because they can't afford the items featured in the shop and worn by celebrities. The knee-jerk reaction is to become happy by buying something else.
two commandments of manipulative retail. One is extremeness aversion... when consumers are uncertain, they shy away from the most expensive item offered or the least expensive; the highest quality or lowest; the biggest or the smallest. Most favor something in the middle. ...trade-off contrast = when too many choices dimensions exist (color, size, clarity, whatnot), people will zoom in on obvious wins. Say you want to sell a lot of a certain handbag, remove the strap from one bag, and sell the strapless version for a little more.
trade-off contrast. (bad explanation by Poundstone)
The key to pricing lies in managing the consumer's limited attention
there are a lot of areas where people who have experience think they're experts. But the difference is that experts have predictive models, and people who have experience have models that aren't necessarily predictive.
American businesses spend roughly $20 billion each year on drinks for clients and business partners. That's about 12 percent of the retail alcohol market.
Say you've got a $100 product. You don't sell it for $100; it's $149 discounted to $99. As time goes by, inflation nibbles at your profit and you have to raise the price. Don't raise the price ($149), lower the discount (to $109).