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Priced to Influence, Sell & Satisfy: Lessons from Behavioral Economics for Pricing Success

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Pricing holds the key to business success. The greatest challenge in pricing is the human factor. To price effectively, customer psychology usually trumps rational microeconomic thinking. How did Subway turn one accidentally discovered price promotion into a multi-billion dollar success story? How much knowledge of prices do customers really have? Why do most people Pricing holds the key to business success. The greatest challenge in pricing is the human factor. To price effectively, customer psychology usually trumps rational microeconomic thinking. How did Subway turn one accidentally discovered price promotion into a multi-billion dollar success story? How much knowledge of prices do customers really have? Why do most people spend two months’ salary to buy an engagement ring? Does Pay What You Want pricing really work? How can you get your customers to trade up? Why do Supreme t-shirts sell for $1,500 or more? Why do so many consumers hate Uber’s surge pricing even though economists love it? In Priced to Influence, Sell & Satisfy , you will find answers to these and many more questions. The book introduces the latest thinking about Psychological Pricing, the science of designing effective pricing strategies using behavioral economics principles. You will learn how customers search for, evaluate, share, and use prices in their buying decisions, how they participate in setting prices, and what managers can do to understand and influence these processes. Psychological pricing actions are levered. Many of them require relatively small investments and produce disproportionately large returns to the business.


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Pricing holds the key to business success. The greatest challenge in pricing is the human factor. To price effectively, customer psychology usually trumps rational microeconomic thinking. How did Subway turn one accidentally discovered price promotion into a multi-billion dollar success story? How much knowledge of prices do customers really have? Why do most people Pricing holds the key to business success. The greatest challenge in pricing is the human factor. To price effectively, customer psychology usually trumps rational microeconomic thinking. How did Subway turn one accidentally discovered price promotion into a multi-billion dollar success story? How much knowledge of prices do customers really have? Why do most people spend two months’ salary to buy an engagement ring? Does Pay What You Want pricing really work? How can you get your customers to trade up? Why do Supreme t-shirts sell for $1,500 or more? Why do so many consumers hate Uber’s surge pricing even though economists love it? In Priced to Influence, Sell & Satisfy , you will find answers to these and many more questions. The book introduces the latest thinking about Psychological Pricing, the science of designing effective pricing strategies using behavioral economics principles. You will learn how customers search for, evaluate, share, and use prices in their buying decisions, how they participate in setting prices, and what managers can do to understand and influence these processes. Psychological pricing actions are levered. Many of them require relatively small investments and produce disproportionately large returns to the business.

31 review for Priced to Influence, Sell & Satisfy: Lessons from Behavioral Economics for Pricing Success

  1. 4 out of 5

    Luis Tenorio

    El autor inicia diciendo algo que es muy cierto, en las 4Ps del marketing el precio muchas veces es a lo que se dedica menos tiempo, y en realidad ejerce un peso importante. Si lo hubiera leído hace dos años o más no hubiese sido capaz de comprender la importancia que tiene el precio para influir, no solo en la compra, sino en la percepción de la marca y además (y más asombroso) en la capacidad de que el producto o servicio ejerza una diferencia real en las vidas de los usuarios (efecto placebo) El autor inicia diciendo algo que es muy cierto, en las 4Ps del marketing el precio muchas veces es a lo que se dedica menos tiempo, y en realidad ejerce un peso importante. Si lo hubiera leído hace dos años o más no hubiese sido capaz de comprender la importancia que tiene el precio para influir, no solo en la compra, sino en la percepción de la marca y además (y más asombroso) en la capacidad de que el producto o servicio ejerza una diferencia real en las vidas de los usuarios (efecto placebo). Para aquellos que tienen productos o servicios que no son commodities, es un libro que no se debería pasar por alto.

  2. 5 out of 5

    Ronald J.

    His Value Pricing Framework defines value narrowly in dollars and cents. Why not just say value is subjective? Plus, value is a feeling, not a number. Prices are narrowly dollar and cents, but a buyer and seller can disagree on value and still agree upon a price, if so desired. This is why I like how he quoted Plato: “A good decision is based on knowledge and not on numbers.” And I’m a recovering CPA. I liked the idea that price is a physical stimulus, subject to psychophysical laws. This ties in His Value Pricing Framework defines value narrowly in dollars and cents. Why not just say value is subjective? Plus, value is a feeling, not a number. Prices are narrowly dollar and cents, but a buyer and seller can disagree on value and still agree upon a price, if so desired. This is why I like how he quoted Plato: “A good decision is based on knowledge and not on numbers.” And I’m a recovering CPA. I liked the idea that price is a physical stimulus, subject to psychophysical laws. This ties into to Rory Sutherland’s book, Alchemy. Using psychological pricing isn’t about manipulation, but rather to initiate and maintain mutually beneficial, long-lasting relationships. It is goal-oriented; rigorous; synergistic with his VP Framework; measurable; and impactful. It requires little investment but can have disproportionate returns. He presents an improvement framework to the McKinsey Customer Decision Journey (CDJ): Needs-Adaptive Customer Journey (NACJ), where the customer moves back and forth between one of 16 psychological states. I also appreciated the concept of a price vocabulary to distinguish a company from its competition, especially the example of Southwest Airlines “Transfarency,” and hacks the Costco prices (Walmart, TJ Maxx, BJ’s Wholesale and Home Depot also use prices to signal various pricing information. These types of prices create sustainable differentiation, increase customer engagement, and reward loyal customers who take the time to learn what they mean (similar to a loyalty program). There are many academic studies cited on the various behavior effects of prices: such as price endings (between 30-65% of all prices in the USA end with 9, so called “charm prices” because they charm money out of shopper’s wallets). Charm prices can increase sales, according to various studies dating back to 1936, anywhere from 5% to 75%, this is because consumers only pay attention to the leftmost digits. They are more effective for new products than previously sold ones, and probably shouldn’t cover no more than 25-30% of all products or services. I have doubts about this in B2B markets, especially for professional firms, and have not used charm pricing as a result, with no detrimental effects. But Apple does use them, and quite successfully. Round numbers convey quality, and he cites that 79.8% of Macy’s prices, and 84.5% of Nieman Marcus prices ended in round numbers, whereas only 6.3% of Target’s and 1.1% of K-Mart’s were round. Prices ending in 7 are popular technology and online pricing, based on anecdotes (perhaps 7 is a lucky or happy number, or most occurring in the Bible?). In Eastern countries, 8 is a popular ending, especially in China (where 4 is associated with death). In Israel in January 2014, they outlawed use of all non-zero pricing endings due to the obsolescence of small denomination coins, and sellers widely adopted prices ending with 90. As my colleague Ed Kless says, “Business ain’t science.” A lot of consumers cannot recall prices, so they rely on an acceptable range, or “normative” prices. The discussion of diamond engagement rings and De Beers in the late 1930s making it a ritual is not only because of De Beers slogan. Courts in the USA also stopped awarding “breech of promise” damages and thus the diamond ring became a sort of performance bond—go back on your word, and I keep the expensive ring. But the two month salary anchor on what you should spend on a ring was pure genius, recognizing that value is subjective (average priced paid in USA in 2018 was $7829, just over two-months after-tax salary for median wage earners). He explains how an itemized list of prices (price + shipping + resort fees + other fees) is superior to an all-inclusive price, which is why airlines, cellular carriers, etc., itemized their billings like this—called partitioned pricing. Customers might complain about these charges on review sites, but they seem to fixate on just the base price, so they work. Again, I don’t like this in B2B markets, and especially not in professional firms, such as technology and admin fee surcharges, but I do understand the partitioned pricing logic, and the studies appear to back it up. Of course, it’s brand dependent. He notes Zappos uses the all-inclusive option If done on top of hourly billing (which are not prices!), it is even more frustrating for the customer. The chapter on negotiating price was interesting. This is not common in the USA, but why not? Sellers are willing to cut prices, might as well ask them. With price optimization software, customized pricing and algorithms it’s more likely merchants will negotiate (assuming you’re dealing with someone who has the authority to do so). He does cite that valid reasons for changing prices include rising raw material or labor costs, but price justifies costs, not the other way around. Consumers don’t exist to cover a company’s overhead, and I don’t think firms should resort to cost increases to justify their prices. They need to emphasize value. There’s also an interesting discussion of Uber’s surge pricing—he’s right, they need a better term, like priority pricing or convenience pricing. There’s other effects, like scarcity, price-matching guarantees, the power of Sale signage, etc. He cites David Ricardo, but I believe the passage has more to do with Ricardo questioning his beloved labor theory of value, which he grappled until the day he died (and never figured it out). The Marginalist Revolution of 1871-74 did it for him (and Adam Smith had the same fixation with the labor theory of value). Overall, it’s a good book, lots of good stories and examples. The focus is more B2C than B2b, which is to be expected. You’ll learn some things, but your mileage may vary. I don’t believe pricing is as subject to the scientific method as most of these researchers do. There is still a big replication crisis among a lot of these studies. That said, it’s worthwhile for the questions it raises. Innovation and creativity are up to you.

  3. 5 out of 5

    Maciek Wilczyński

    The psychological approach toward pricing methods. Author carefully cherry picked most common behavioral economics topics and written about them from pricing pesrpective. Mostly saavy tips & tricks, which may help you, but of course, won't work as a base. The book is more of a strawberry on top of a cake rather than a foundation, but connected with the previous piece from Utpal Dholakia, it's a good combination (Author mentions that you can't use it as a solitary guide) I've recently read new boo The psychological approach toward pricing methods. Author carefully cherry picked most common behavioral economics topics and written about them from pricing pesrpective. Mostly saavy tips & tricks, which may help you, but of course, won't work as a base. The book is more of a strawberry on top of a cake rather than a foundation, but connected with the previous piece from Utpal Dholakia, it's a good combination (Author mentions that you can't use it as a solitary guide) I've recently read new book of Dan Ariely, which tried to partially tackle the same topic. This one is much better. Again, the best value for money as I bought it through Kindle Unlimited. Probably, most managers and leaders (as long as they have pricing authority) can identify some ideas, which they can incorporate.

  4. 5 out of 5

    Bryan

    Great read! Helps to understand the latest in behavioral economics with respect to pricing. You're never going to look at any pricing promotion the same way after you get through this book. Great read! Helps to understand the latest in behavioral economics with respect to pricing. You're never going to look at any pricing promotion the same way after you get through this book.

  5. 5 out of 5

    Balachandar Kaliappan

  6. 4 out of 5

    Hosea

  7. 4 out of 5

    Kadiri Saliu

  8. 5 out of 5

    Christophe Lembregts

  9. 4 out of 5

    Patrick M.

  10. 5 out of 5

    ORioux

  11. 5 out of 5

    David

  12. 5 out of 5

    Ben

  13. 5 out of 5

    Jiantao Jiao

  14. 5 out of 5

    Juan Carlos Vallejo

  15. 5 out of 5

    Bartosz Majewski

  16. 4 out of 5

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  17. 4 out of 5

    Jordan Go

  18. 4 out of 5

    Warren

  19. 5 out of 5

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  20. 4 out of 5

    Mike Sherman

  21. 4 out of 5

    Lassi

  22. 5 out of 5

    Sammy Dayan

  23. 4 out of 5

    Reed Iredale

  24. 4 out of 5

    MA JINGXUAN

  25. 4 out of 5

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  26. 4 out of 5

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  27. 5 out of 5

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  28. 5 out of 5

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  29. 4 out of 5

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  30. 5 out of 5

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  31. 5 out of 5

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