how to price your platypus - david abbott, insight best practice
TRANSCRIPT
How to Price Your Platypus:Using an understanding of customer psychology to
get a higher price for your product or service
David AbbottInsight Best Practice
[email protected] 07971 962235 @davidatinsight
ProductPlacePromotionPrice
Traditional Pricing Approaches
Cost+Competition
Heuristics(rules of thumb)
But Business Customers Are Rational…
Aren’t they?
Parole Decisions
No Previous OffensesRehabilitation Program
65%
% of Prisoners Granted Parole
10%
Shai Danzigera, Jonathan Levavb and Liora Avnaim-Pessoa: ‘Extraneous factors in judicial decisions’, Proceedings of the National Academy of Sciences of the United States of America
Price Relativity
1
1000 People Said….
Suit
Pen
0 10 20 30 40 50 60 70 80 90
Yes No
Jonathan Ping: ‘MyMoneyBlog’, 2010
Proposal for ClientFire Alarm System
Option 1: £43,187Standard alarm systemReuse existing wiring system
Option 2: £52,942Premium alarm systemBS standard wiringMaintenance
Option 3: £68,446Premium alarm systemBS standard wiringMaintenanceFire suppression systemIntegration with security systems
£19.99£27.99£9.99 £29.99
Don’t leave it to the customer to decide what to compare you against – guide the comparison
Price Anchors
2
00-19 20-39 40-59 60-79 80-99 0
10
20
30
40
50
60
Cordless Trackball Cordless Keyboard Design Book Neuhaus Chocolates 1998 Cotes du Rhone 1996 Hermitage
Dan Ariely, George Loewenstein, Drazen Prelec; “Coherent Arbitrariness: Stable Demand Curves without Stable Preferences”, Quarterly Journal of Economics (2003)
6510£7 - £10 £40 - £60
47 7732
8759
8
29
Tredaire Dreamwalk Tredaire Sensation
Proposal for ClientSystem 100 Fire Alarm
Option 1: £68,446Premium alarm systemBS standard wiringMaintenanceFire suppressionIntegration with security systems
Option 2: £52,942Premium alarm systemBS standard wiringMaintenance
Option 3: £43,187Standard alarm systemReuse existing wiring system
Option 1 £22,577.42
Option 2 £2,664.00
Option 1 £25,144.85
Option 2 £22,577.42
Option 3 £2,664.00
£9.99£29.99£39.99
Platypus 60
Create (arbitrary) anchorsBreak the anchors
Questions
3Price vs
Value
Sales
LowNormalHigh
Sales
LowNormalHigh
“No one ever got fired for buying
IBM”
£49.99
Set price expectations (packaging, branding, ambiance)Just try a higher price
Arbitrary Precision
Malia F. Mason, Alice J. Lee, Elizabeth A. Wiley, Daniel R. Ames: ‘Precise offers are potent anchors: Conciliatory counteroffers and attributions of knowledge in negotiations’, Journal of Experimental Social Psychology, 2013
4
£130,000£129,000
$325,000------------$325,425
27,000 sales analysed
Fewer ‘0’s = less discount
Manoj Thomas, Daniel H. Simon, Vrinda Kadiyali : ‘Do Consumers Perceive Precise Prices to be Lower Than Round Prices? Evidence from Laboratory and Market Data ’, Johnson School Research Paper Series #09-07, 2007
From £117.34 From £127.79 From £103.55 From £112.82
From £89.54 From £89.54 From £132.44 From £132.44
£53,000.00£52,941.39
£68.32
Try an arbitrarily precise price (bigger than your normal price)
1 Price Relativity
2 Price Anchors
3 Price vs Value
4 Arbitrary Precision
5 The Power of
6 Hyperbolic Discounting
7 Price Abstraction
0
Most Expensive Per Litre
In the WORLD????
£100
£100,000
£100,000,000
£100,000,000,000
