The Psychology of Pricing: A Gigantic List of Strategies • Hacker News Board

Re: The Psychology of Pricing: A Gigantic List of Strategies

#51

Post by edpichler » Thu, May 07, 2015, 11:53 AM UTC

It's a really good list, can work as starting point. I advice you to be careful before applying in your business.

Pricing is too important for we stop just with this list. The list just show topics, results and conclusions of experiments, not the psychology experiments made and the reason behind each strategy, so, very easy to be forgotten, or even applied wrongly.

If you want to lean in a way you will never forget, and apply it correctly, you need to read some books about pricing.

Books about pricing on Amazon: http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias%3Dst...

Re: The Psychology of Pricing: A Gigantic List of Strategies

#52

Post by kornakiewicz » Thu, May 07, 2015, 12:08 PM UTC

I am biased (or the audience of this post, who knows) because neither I am nor a salesman or startups funder (not even american), but I really feels bad about the vendor when noticed that psychological tricks are used to convince me to buy something. Yes, I know that's how world works, but I am more keen to buy when I am sure and here is a room for valuable marketing.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#53

Post by neo_optimus » Thu, May 07, 2015, 12:31 PM UTC

Excellent writeup. Just one point that I disagree on is the Shipping price split up. I tend to look for other sellers when I see one with paid shipping, and tend to favour free shipping sellers more.

- If you are combining a discount with the product, and mention a shipping charge, the discount registers as a false discount ('He is just shifting costs through shipping split')

- Maybe it registers as more of mental processing (X$ + Y$ needs more time to process than Z$)

- Sometimes, it is human nature to be greedy, and look for best value possible. Seeing a shipping cost feels like seller is not 100% working for the customer, or we just become plain greedy, that why should someone else get a part of the price.

Just my 2 cents.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#54

Post by chippy » Thu, May 07, 2015, 12:34 PM UTC

hobofan wrote: post #34

Nice write-up, but it hurts to see a generalized warning against dynamic pricing since that's what we provide with our product Baabedo[0] (we don't adjust prices on a per-customer level though). One point where we observed the exact opposite effect is the splitting of shipping cost. Products with free shipping sell better than with split pricing, but that might be a marketplace specific effect of Amazon. [0] https://…

I'd say the dynamic pricing should be done transparently, that is, the user should know that the products have been re-priced.

It also depends very much on how you do it.

From the article:

>Is dynamic pricing always bad? Not necessarily. Dynamic pricing can be effective when adjustments are based on supply and demand (e.g., stadiums trying to fill remaining seats).

>Dynamic pricing becomes harmful when adjustments are based on a customer’s willingness to pay. You should avoid charging different prices based on past behavior, demographics, or any other factor besides natural supply and demand.

Does badbedo do re-pricing based on the positive or negative factors? From the blog it appears to be choosing optimal prices based on the market, not on the user.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#55

Post by CyberDildonics » Thu, May 07, 2015, 12:56 PM UTC

mbesto wrote: post #9

Nick, this is extremely impressive and I applaud you for putting this together so concisely. Some comments: 1. Kahneman and Ariely both mention in their writings how their is a difference between free and even just 1 penny. Especially given how popular Freemium is I thought this might be a good topic for you to cover. (Ariely calls this "market norms" vs "social norms") 2. A common theme here on HN (mainly from peopl…

1. Barrier to entry is very important. Games have an investment in learning the mechanic so getting people to make that investment is something that makes sense to split from the investment of money.

2. Check out the history of Chivas Regal. They were a low shelf blended scotch and at some point decided to simply double their price. No label change, nothing different. Their sales actually went up (and their profit was much higher per bottle obviously).

Re: The Psychology of Pricing: A Gigantic List of Strategies

#56

Post by bryondowd » Thu, May 07, 2015, 1:05 PM UTC

tjradcliffe wrote: post #17

copsarebastards wrote: post #5

This kind of stuff is a strong argument for communism. An immense amount of mental energy was squandered on creating this list (not Nick Kolenda, the people who studied these things). That same energy could have been spent on curing any number of psychological ailments, but instead it was spent on getting people to pay more for less. It's interesting, but as far as I'm concerned the energy was wasted.

Translated: "That same energy could have been spent on something I care about and not what the author cares about." Which kind of explains why communism always leads to tyranny: it is based on the essentially tyrannical assumption that communists alone have the knowledge to decide how everyone else should be spending thier time, and the moral authority to impose that judgement on others by force. The problem is that…

Just curious, but does communism by necessity or definition require central planning? Is a distributed power model not possible, aside from the fact that it hasn't been done?

I'm genuinely curious, as I've never studied political systems in any depth.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#57

Post by chippy » Thu, May 07, 2015, 1:08 PM UTC

QuantumRoar wrote: post #36

That's an interesting read. But it just feels wrong. And the worst is that it works. Could we all just stop buying things based on some annoying pricing tactics and start buying products of companies that we want to support for their good work?

Are you are suggesting consuming based on how the company makes you feel? If they make you feel good, or convince you that they are doing good work then should they get more business? Is that rational? What if they are lying or exaggerating? Doesn't a lot of marketing and advertising seek to increase the positiveness of the particular brand? How about morality? How about if a charity uses these tactics in their fund raising? Is a charity raising funds to protect children allowed to use somewhat manipulative psychological pricing strategies to do good?

My point is that it does feel wrong and it does work, but it works because of feelings and psychology. It's fascinating morally. I agree, it's very hard to stop this and start consuming based on rationality.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#58

Post by chippy » Thu, May 07, 2015, 1:18 PM UTC

soheil wrote: post #18

I also find this list fascinating, but I also agree with other commenters that energy is better spent educating people on these psychological pitfalls than to try to take advantage of them. If "do no evil" was ever a motto that a company believed in this would certainly qualify.

Agreed, but I wonder how many companies would educate people on these tricks? Would it give any company any advantage or benefit? And what if a large charity uses these tricks in their fund raising schemes? In the UK for example we have a number of street "chuggers" (charity muggers) who use a range of bad tactics on the street and doorstep. Legally they are allowed to get away with their bad behaviour because so many people support the charity in normal ways.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#59

Post by chippy » Thu, May 07, 2015, 1:23 PM UTC

FlailFast wrote: post #7

copsarebastards wrote: post #5

This kind of stuff is a strong argument for communism. An immense amount of mental energy was squandered on creating this list (not Nick Kolenda, the people who studied these things). That same energy could have been spent on curing any number of psychological ailments, but instead it was spent on getting people to pay more for less. It's interesting, but as far as I'm concerned the energy was wasted.

While I wouldn't go so far as agree that it's a strong argument for communism (though I do support guaranteed, unconditional basic income myself), I do think it's a strong argument for broad public education initiatives...imagine if there was a required class called "How To Tell When a Politician/Company is Bullshitting You." Seriously, no sarcasm, I think that's an extraordinarily useful skill that is often glossed…

I would pay £19.99 for that course on "How To Tell When a Politician/Company is Bullshitting You.".

Seriously though - it's a great idea, and ironically it could also be a potential profitable start up idea. A start up that takes the side of consumers and decloaks: a) tricky pricing methods b) political bullshit c) herd mentality. Via a range of plugins and services - a bit like an on demand Snopes.

Re: The Psychology of Pricing: A Gigantic List of Strategies

#60

Post by draz » Thu, May 07, 2015, 1:31 PM UTC

danuker wrote: post #47

Animats wrote: post #28

This is a great How to be Evil manual. "If you decide to downsize your product, you should reduce the size of all three dimensions — height, width, and length — by an equal amount. Consumers are less likely to notice a change in all three dimensions." "People will perceive your price to be smaller if you display that price in a smaller font." "People will perceive your price to be lower if it contains fewer syllables…

When I shop, I look at the quantity. If my chocolate has 90 grams instead of 100, I'll immediately put it back and look for another brand - because it's too hard for me to compute how much I would get swindled of.

I'm not sure whether it's a practice everywhere, but many shops in NYC also indicate the "per unit" price: per gallon/oz/pieces etc. I use it all the time, and I wish it was mandatory by law for all products.