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The Hidden Forces That Shape Our Decisions 1 3


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The Hidden Forces That Shape Our Decisions 1 3

  1. 1. The hidden forces that shape our Decisions Are we Predictably Irrational?
  2. 2. When we make decisions we think we're in control, making rational choices. But are we? Lets unmask the subtle but powerful tricks that our minds play on us.
  3. 3. Truth about Relativity <ul><li>Why Everything Is Relative – Even When It Shouldn’t Be </li></ul>
  4. 4. Economist Magazine Subscription – Which will you choose ?
  5. 5. Human Behavior & Relativity <ul><li>Humans rarely choose things in absolute terms. </li></ul><ul><li>We don’t have an internal value meter that tells us how much things are worth. </li></ul><ul><li>Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. </li></ul><ul><li>Most People don’t know what they want unless they see in context. </li></ul>
  6. 6. Few Examples of Relativity <ul><li>TV Sales : </li></ul><ul><ul><li>36-inch Panasonic $690 </li></ul></ul><ul><ul><li>42-inch Toshiba $850 </li></ul></ul><ul><ul><li>50-inch Philips for $1,480 </li></ul></ul><ul><li>Restaurant Menu </li></ul><ul><ul><li>High Priced Menu first on display; </li></ul></ul><ul><ul><li>people will buy second highest. </li></ul></ul>
  7. 7. How our Mind is Wired?
  8. 8. Everything we do in Life is Relative <ul><li>Like Airplane pilot landing in the dark, we want runaway lights on either side of us, guiding us to the place where we can touch down our wheels. </li></ul><ul><li>Thinking is difficult & sometimes unpleasant. </li></ul><ul><li>Offer NO-BRAINER </li></ul>
  9. 9. What is a Decoy? <ul><li>Buying a Home, Bread Baking Machine, Rome & Paris Vacation. </li></ul><ul><li>ONCE YOU SEE the DECOY effect in action, you realize that it is the secret agent in more decisions than we could imagine. </li></ul>
  10. 10. Human Face Valuation
  11. 11. We tend to compare things that r easily comparable & avoid comparing things that cannot be compared easily
  12. 12. Where to apply & Where not to. <ul><li>Relativity can make us Miserable – Jealousy & Envy by comparing our lives. </li></ul><ul><li>Employee with 3 yrs exp right from college expectation exceeds coz of comparing with guys next desk. </li></ul><ul><li>Nobel Prize aspirant comparing to Wall Street friends Salary </li></ul><ul><li>Pen & Suit – 7$ Saving, Catering Bill extra 200$, Leather Sofa & Car Seat </li></ul><ul><li>Think Broadly </li></ul><ul><li>Control the circles around us </li></ul><ul><li>Break the cycle of relativity. </li></ul>
  13. 13. Moral <ul><li>Have a decoy to the product you want to sell. </li></ul>
  14. 14. THINK <ul><li>Apply this now to Polestar. </li></ul><ul><li>How will you design courses with decoy? </li></ul><ul><li>How will you display your course offerings in Brochures? </li></ul>
  15. 15. for Truth on Relativity
  16. 16. Fallacy of Supply & Demand <ul><li>Why the Price of Pearls – and Everything Else is Up in the Air </li></ul>
  17. 17. Pearl Story <ul><li>World War II (1939 – 1945) </li></ul>
  18. 18. <ul><li>James Assael, Italian Diamond Dealer flee to Cuba from Europe. </li></ul><ul><li>American army requires water proof watch </li></ul><ul><li>James Assael supply watch through his contact from switzerland </li></ul>
  19. 19. <ul><li>Contract with US Gvmt ended after Worldwar but Assael was left with thousands of watches </li></ul><ul><li>Japanese Watch Requirement </li></ul><ul><li>Japan had no Money & Traded Pearls </li></ul><ul><li>Son of James, Salvador Assael came to be known as Pearl King </li></ul>
  20. 20. <ul><li>1973 Assael Meets French Man Jean-Claude Brouillet travelling in adjacent Yacht </li></ul><ul><li>Jean & his Tahitian wife had purchased an atoll in French Polynesia ( is a French overseas collectivity in the southern Pacific Ocean. It is made up of several groups of Polynesian islands ) . </li></ul>
  21. 21. <ul><li>Jean & his wife explained about black-lipped oysters in the turquoise waters which gives black pearls. </li></ul><ul><li>Salvador & Jean got into Pearl Harvesting </li></ul><ul><li>Marketing efforts failed at first! </li></ul><ul><li>Waited for one year for better operation & specimen </li></ul><ul><li>Didn’t compromise with discounts or bundling with other jewels. </li></ul>
  22. 22. <ul><li>Partnering with Gem-stone dealer. String of Tahitian Pearls @ NYC, Fifth Avenue with spray of diamonds, rubies & emaralds with an outrageously HIGH price tag. Rest is history. How did PEARL-KING do it? </li></ul>
  23. 23. Mark Twain’s Quote <ul><li>In Tom Sawyer “Tom had discovered a great law of human action, namely, that in order to make a man covet a thing, it is only necessary to make the thing difficult to attain’ </li></ul>
  24. 24. Goslings & Imprinting Do our first impressions & decisions become imprinted like Goslings?
  25. 25. Anchor & Imprint <ul><li>Anchor : DO we accept the first price that comes before our eyes when we encounter a new Product? </li></ul><ul><li>Imprint : Stick with the Anchor once its been made. </li></ul><ul><li>Pearl King “anchored” his pearls to the finest gems in the world – and the prices followed forever after. </li></ul>
  26. 26. Arbitrary Coherence <ul><li>Arbitrary : Although Initial Price are Arbitrary, once those prices are established in our minds they will shape not only present prices but also future prices(so coherent) </li></ul><ul><li>Experiments conducted and proved humans do behave like Goslings. </li></ul><ul><li>First Decision becomes habit. (Be careful in Pricing, we cant erase memory of our consumers) </li></ul>
  27. 27. Herding & Self-Herding <ul><li>Herding : Follow queue in crowded restaurant or coffee shop </li></ul><ul><li>Self-Herding : Following our own action. E.g. StarBucks & Dunkin Donuts or ( Chn Saravana Bhavan & Sangeetha) </li></ul>
  28. 28. <ul><li>How did Starbucks anchor over previously anchored price of Dunkin Donuts? </li></ul><ul><li>Answer : Separated Starbucks from other coffee shops through AMBIENCE. Make Experience feel different-SO DIFFERENT that would be open to new anchor. </li></ul>Short, Tall, Grande & Venti High pedigree names like Caffe Americano, caffe Misto, Macchiato, Frappuccino
  29. 29. Original Decision – Wise? <ul><li>E.g. Tom Sawyer : Make his friends Whitewash. Pleasurable or Painful depends on the first choice we make. </li></ul><ul><li>Trivial to Profound choices anchoring plays a role </li></ul><ul><li>Have we made some random decisions in the past and sticking to it assuming that our original decisions were wise? </li></ul><ul><li>Suppose we are nothing more than the sum of our first, naïve random behaviors, what then? </li></ul><ul><li>First decision is crucial as it affects every other decisions henceforth. </li></ul><ul><li>Inventory Anchors & Imprints in our lives. </li></ul><ul><li>Reconsider old choices </li></ul>
  30. 30. Traditional & Behavioral Economics <ul><li>Prices determined by a balance between supply group and purchasing power of demand group </li></ul><ul><li>Std. Economic Framework states consumers willingness to pay determines Market price (against proven Arbitrary Coherence) </li></ul><ul><li>Willingness to pay can be manipulated as per new behavioral economics(Tom sawyer + Experiments conducted) </li></ul>
  31. 31. Moral <ul><li>Anchors & Imprints </li></ul><ul><li>PRICE CAN BE MARKETED, MADE AS ANCHORS, SET AS IMPRINTS. </li></ul><ul><li>Relationship between demand and supply is dependant unlike traditional economics </li></ul><ul><li>This is based on memory and not on preferences –wine & milk price </li></ul><ul><li>Humans are like goslings unless u differentiate </li></ul><ul><li>Herding & Self-Herding </li></ul>
  32. 32. THINK <ul><li>How can we apply to Polestar? </li></ul>
  33. 33. <ul><li>for Fallacy on Demand & Supply </li></ul>
  34. 34. Cost of ZERO Cost <ul><li>Why We Often Pay Too Much When We Pay Nothing </li></ul>
  35. 35. History of Zero <ul><li>From Babylona </li></ul><ul><li>Greeks mused “How could something be nothing” </li></ul><ul><li>Indian Pingala paired zero with digits to form double digits. Sanskrit “Sunya” </li></ul><ul><li>Become part of numerals for Mayans & Romans </li></ul><ul><li>AD 498 Aryabata sat on his bed and said “Sthanam Sthanam Dasa Gunam” </li></ul>
  37. 37. Why Free ATTRACTS us? <ul><li>Humans afraid of Loss. </li></ul><ul><li>When FREE or ZERO Price we see only positive and not bothered about Negative </li></ul><ul><li>Few Success Stories : Amazon Shipping, AOL Pay per hour to monthly package, BMW Car 3 years oil change offer, DVD Player offering Free DVD’s. </li></ul>
  38. 38. Moral <ul><li>To attract crowd there’s nothing like ZERO PRICE </li></ul><ul><li>To sell more, make part of your product free. </li></ul>
  39. 39. THINK <ul><li>How can we apply to Polestar? </li></ul>
  40. 40. <ul><li>for Cost of ZERO Cost </li></ul>