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Price Anchoring, Or Why a $499 iPad Seems Inexpensive

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Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#61

Post by zaidf »

mcantor wrote: post #43
zaidf wrote: post #26

Earlier quoted context omitted.

I read on here few months ago that naming your own price first is better. Now I believe it! Recently we hired a sales person on PT basis. At the interview, she gave her expected salary to be about 2.5 times what I had thought about paying her. Now, I know about this notion of anchoring and yet I felt kind of embarrassed to make my initial offer. I fought off the urge to buy into her frame and ultimately made a decent…

It feels so hilariously appropriate that you were hiring a sales person, and they did a spectacular job of, as they say, "selling themselves."

Yes, she is good :) Her accomplishments included talking herself out of four speeding tickets and from going to jail in Columbia. We'll know soon how well she's doing that magic in selling our product!

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#62

Post by zaidf »

zaidf wrote: post #26
ciniglio wrote: post #22

It's interesting that he mentions that naming a number first in salary negotiations is to your advantage, when the usual advice is that the first person to name a number loses. If there is really no rebound effect, why don't we hear stories of people asking for outrageous amounts of money, instead of letting the hiring manager name a salary first?

I read on here few months ago that naming your own price first is better. Now I believe it! Recently we hired a sales person on PT basis. At the interview, she gave her expected salary to be about 2.5 times what I had thought about paying her. Now, I know about this notion of anchoring and yet I felt kind of embarrassed to make my initial offer. I fought off the urge to buy into her frame and ultimately made a decent…

To add to this, my Dad also uses this with car sales people.

1. He picks the absolute bottom price.

2. Calls up the area dealerships within 50 miles

3. Tells them the model, price and his phone number to call back when they are ready to give him at his price

He totally shuts off any attempts by the sales people to erase my Dad's first number with their own by insisting he does not care about any extra features and other bs. His number is also terribly low(ALMOST but not totally in the you're joking category) so typically he can get the car within $500 of his quoted number. What does work for him is he communicates certainty of his decision to buy a car which is a tad easier because he is a surgeon.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#63

Post by hugh3 »

josh33 wrote: post #33

Another example of price anchoring: Points on Hacker news. I feel like this comment deserves 32 points. Can you meet my offer?

1 point by josh33 5 hours ago

Apparently not.

In fact, I'm sure I'll get modded down for this, but it seems to work the other way around; if you say "I'm sure I'll get modded down for this" then you'll get modded up. Of course since I've transparently pointed it out in this case I'm sure I actually will get modded down for this.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#64

Post by hugh3 »

ExtremePopcorn wrote: post #6

Dan Ariely gives a related TED talk: "Are we in control of our own decisions?" http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_o... Look around 11:30 for a few examples of how comparing options affects us more than looking at each individually. On a side note, it also seems inexpensive because it's $499 and not $500! Psychological pricing is one of my larger pet peeves...

This doesn't bother me as much as the movie-popcorn pricing system, which seems to be rapidly spreading to everything (Cold Stone and Jamba Juice are two particularly egregious offenders). You can have the miniscule size for $5, the "medium" size for $5.75, or the insanely large size for $6.95. Of course they never even expected to sell the other two sizes, they're only there to make the medium size (which is still way more than I wanted to eat) look cheap.

While I'm on the subject, here's a fun fact: a chocolate-peanut-butter flavoured milkshake from Cold Stone, in their largest size, contains over two thousand calories.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#65

Post by mikecane »

NathanKP wrote: post #52

In my opinion a $499 iPad doesn't cost enough. $499 does not reflect the true cost of the device in terms of materials, labor, and shipping. Your cheap iPad is subsidized by ripping off underpaid miners and workers in third world countries. Even if Apple makes sure their device is not assembled using slave labor they can't be sure that all the parts and materials were produced using fair labor practices, and the real…

>>>Even if Apple makes sure their device is not assembled using slave labor they can't be sure that all the parts and materials were produced using fair labor practices, and the reality is that they probably weren't.

What company can say that, tho? What devices are we all using that contain, for example, Coltan? http://www.nytimes.com/2001/08/12/magazine/the-dirt-in-the-n...

Even here in America, think about meat packers and such. Every time you eat, you could be perpetuating a system you might want to change if you saw what it was.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#67

Post by jrockway »

hugh3 wrote: post #63
josh33 wrote: post #33

Another example of price anchoring: Points on Hacker news. I feel like this comment deserves 32 points. Can you meet my offer?

1 point by josh33 5 hours ago Apparently not. In fact, I'm sure I'll get modded down for this, but it seems to work the other way around; if you say "I'm sure I'll get modded down for this" then you'll get modded up. Of course since I've transparently pointed it out in this case I'm sure I actually will get modded down for this.

Correct.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#68

Post by webwright »

jeff18 wrote: post #49
webwright wrote: post #40

Earlier quoted context omitted.

While I hope to never be negotiating for a salary again, here's what I'd say when asked about a salary in a hypothetical job interview (to have my cake and eat it too): "What kind of salary do I want? That's a hard question, especially in light of the fact that working with you guys is the most interesting opportunity I'm evaluating. I'd expect offers around [insert aggressive number], but again- let me stress that I…

I don't know if you'd want to make it extremely clear that the employer is your first choice and you would like to negotiate your salary to a lower point. It seems like you'd want the exact opposite of that.

Yeah, if I thought I was worth $100k (and that they were going to offer me that), my aggressive # might be $150k or $200k. It's unlikely that they'd say, "Well gosh-- he really likes us, so let's offer him $80k".

There's also a lot of powerful psychology about saying that you really want to work with them rather than playing hard to get. By saying, "you're my favorite!" (truth or not), you're establishing with them (in their minds) that you're an exceptional judge of character. :-)

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#69

Post by hugh3 »

jrockway wrote: post #67
hugh3 wrote: post #63

Earlier quoted context omitted.

1 point by josh33 5 hours ago Apparently not. In fact, I'm sure I'll get modded down for this, but it seems to work the other way around; if you say "I'm sure I'll get modded down for this" then you'll get modded up. Of course since I've transparently pointed it out in this case I'm sure I actually will get modded down for this.

Correct.

I love it when I'm right.

Re: Price Anchoring, Or Why a $499 iPad Seems Inexpensive

#70

Post by Shamiq »

paraschopra wrote: post #14
ExtremePopcorn wrote: post #6

Dan Ariely gives a related TED talk: "Are we in control of our own decisions?" http://www.ted.com/talks/dan_ariely_asks_are_we_in_control_o... Look around 11:30 for a few examples of how comparing options affects us more than looking at each individually. On a side note, it also seems inexpensive because it's $499 and not $500! Psychological pricing is one of my larger pet peeves...

Dan Ariely's book Predictably Irrational is also highly recommended! It contains numerous such examples.

I have a copy if anyone wants to take it off my hands. Just pay the shipping :)
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