Using an understanding of customer psychology to get a higher price for your product or service

1. How to Price Your Platypus:
Using an understanding of customer psychology to
get a higher price for your product or service
David Abbott
Insight Best Practice
david@insight-bp.co.uk 07971 962235 @davidatinsight

3. Product
Place
Promotion
Price

4. Traditional Pricing
Approaches
Cost+
Competition

7. Heuristics
(rules of thumb)

8. But Business Customers
Are Rational…
Aren’t they?

9. Parole Decisions
No Previous Offenses
Rehabilitation Program

10. 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

12. Price
Relativity
1

19. 1000 People Said….
0 10 20 30 40 50 60 70 80 90
Suit
Pen
Yes No
Jonathan Ping: ‘MyMoneyBlog’, 2010

20. Proposal for Client
Fire Alarm System
Option 1: £43,187
Standard alarm system
Reuse existing wiring system
Option 2: £52,942
Premium alarm system
BS standard wiring
Maintenance
Option 3: £68,446
Premium alarm system
BS standard wiring
Maintenance
Fire suppression system
Integration with security systems

21. £19.99£27.99£9.99 £29.99

22. Don’t leave it to the customer
to decide what to compare
you against – guide the
comparison

23. Price
Anchors
2

24. 0
10
20
30
40
50
60
00-19 20-39 40-59 60-79 80-99
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)

25. 6510
£7 - £10 £40 - £60
47 77
32
87
59
8
29

27. Tredaire Dreamwalk Tredaire Sensation

28. Proposal for Client
System 100 Fire Alarm
Option 1: £68,446
Premium alarm system
BS standard wiring
Maintenance
Fire suppression
Integration with security systems
Option 2: £52,942
Premium alarm system
BS standard wiring
Maintenance
Option 3: £43,187
Standard alarm system
Reuse existing wiring system

29. 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

33. £9.99£29.99£39.99
Platypus 60

34. Create (arbitrary) anchors
Break the anchors

35. Questions

36. 3
Price vs
Value

37. Sales
Low
Normal
High

38. Sales
Low
Normal
High

41. “No one ever got
fired for buying
IBM”

44. £49.99

45. Set price expectations
(packaging, branding,
ambiance)
Just try a higher price

46. 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

48. £130,000
£129,000

50. $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

51. From £117.34 From £127.79 From £103.55 From £112.82
From £89.54 From £89.54 From £132.44 From £132.44

52. £53,000.00
£52,941.39

53. £68.32

54. Try an arbitrarily precise
price (bigger than your
normal price)

55. 1 Price Relativity
2 Price Anchors
3 Price vs Value
4 Arbitrary Precision

56. 5 The Power of
6 Hyperbolic Discounting
7 Price Abstraction
0

57. Most Expensive
Per Litre
In the
WORLD????

60. £100,000

61. £100,000,000

62. £100,000,000,000

63. Questions
David Abbott
Insight Best Practice
david@insight-bp.co.uk 07971 962235 @davidatinsight