The Psychology of Pricing: A Gigantic List of Strategies
nickkolenda.com
The Psychology of Pricing: A Gigantic List of Strategies
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Re: The Psychology of Pricing: A Gigantic List of Strategies
#2Can knowledge of these strategies reduce their effectiveness on the part of the buyer?
For example, even though many items like gas are priced at 2.1999, I calculate it to be $2.20.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#3Can knowledge of these strategies reduce their effectiveness on the part of the buyer? For example, even though many items like gas are priced at 2.1999, I calculate it to be $2.20.
That's a good question. I think it depends on the pricing technique.
For example, research shows that anchoring effects occur even when people are explicitly warned about anchoring before they make their estimate.
On the other hand, if people are aware of other pricing techniques, then those techniques could backfire in a negative direction. For example, researchers have found a "reverse priming effect." In other words, if people detect some persuasive intent behind the marketer, then those people are more likely to resist that persuasion attempt. So it could make things worse.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#4Can knowledge of these strategies reduce their effectiveness on the part of the buyer? For example, even though many items like gas are priced at 2.1999, I calculate it to be $2.20.
I think, things like this work even if you know the underlying mechanism in the pricing strategy.
As an alternate example, my realtor regularly keeps in touch with me by email, using new letters, calling me on my birthday, etc and even though I know that he is being nice mostly because he wants referrals from me (definitely not because of my winning personality :-)), I still feel obligated to give him referrals.
Likewise, knowledge of the pricing strategy doesn't necessarily make you immune to it's effects unless you consciously stop and think and able to compare with other similar services/products and are prepared to take your time.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#5This 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.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#6This 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.
just because capitalism has major issues doesn't mean communism is the correct alternative answer.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#7This 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 over, and if someone made a curriculum for understanding psychological biases, that could prove insanely useful at mitigating the effectiveness of these ploys.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#8This 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.
I see where you're coming from. Hopefully I can defend some some of the researchers in that field :)
Although most applications of that research are often applied to business and marketing, the underlying research has broader implications. For example, some of those studies progressed our understanding of cognition in general (the researchers merely used numbers in their study - which was then adapted for pricing applications). But we now understand more about our brain's processes than we did before.
And ,with a better understanding of cognition, we can help pave the way toward other, more benevolent applications (e.g., curing psychological ailments).
So even though that research may not produce benevolent results directly, I would argue that it helps indirectly (among many other benefits too).
So that's my two cents.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#9Nick, 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 people like Patio) is to "charge higher". I couldn't find a place that explicitly mentioned this. Many people perceive higher quality and value of products and services simply because they cost more (regardless of whether they actually do or not)
3. No mention of Kahneman?!?
This is awesome regardless...saving it and sharing it with some clients.
Feel free to contact me directly if you want me to elaborate on any of this.
Re: The Psychology of Pricing: A Gigantic List of Strategies
#10Nick, 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…
Thanks so much for the kind words.
1. I remember reading about that concept in Ariely's book. And I actually considered adding it to the list, but I wasn't sure where to incorporate it.
2. I think everything boils down to your ability to communicate the value of your offering. People will pay any amount, as long as they perceive to be getting more value from it.
3. And I can't believe I didn't mention Kahneman anywhere! His research was a large foundation behind a good portion of those techniques.