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- Number three. Reason number 3.
Psychology of price.
You get what you pay for.
There's a segment in the marketplace, not everybody,
but there's a segment in the marketplace that they
make buying decision based on price.
Not cheap price.
They have this perception, including myself,
that if it costs a lot it must be?
Yeah, it must be good.
It's a shortcut to a buying decisions.
Gentlemen, if you want to get a suit,
you go get a suit and say hey-
you go to this tailor and they say I've got this suit here,
it's spectacular.
This is a great suit.
It's custom-tailored and everything else.
99 dollars.
Like what? Right?
Same tailor saying you know, we've got this suit.
This material, feel it.
This suit custom-tailored.
Two grand.
That's more like it, right?
See, so it's a short cut to buying decisions.
You get what you pay for.
People have this perception.
If you think, oh but Dan I'm kind of concerned if
I raise my prices then people are not gonna buy
from me anymore.
Yes, some people, some of the cheap customers will leave.
But at same time, you also open up the door
and you can attract better, high-quality customers.
Does that make sense?
Yeah.
Reason number three: psychology of price.
Psychology of price.
Let me tell you a story.
Early 2012, there was research done at Stanford University
at California Institute of Technology.
Very interesting.
They took a bunch of volunteers
and asked them to take part in this wine tasting
kind of a experiment.
Five wines.
Five bottles wine for them to sample
all labeled with the price:
five dollars, 10 dollars, and then 35 dollars,
and then up to 90 dollars.
Five different labels.
Five different prices.
They asked a bunch of volunteers just drink the wine.
See which one you like the most.
Now take a guess.
Which?
They're not that crude.
They're not all the same wine.
But take a guess which bottle,
which price tag people picked that tastes the best.
90 bucks, right?
You're right.
It's not the same wine but there's three different wines
that there was some cross-over.
Volunteers prefer the 90 dollar wine.
They described this-
How many of you drink red wine by the way?
So they have these terms right?
Oak-ey richness with undertones of burnt chocolate
or all the shit they say, right?
After 90 dollar, which is actually is a 10 dollar wine.
It's a 10 dollar wine.
What's very interesting-
Then they send in a
second set of volunteers.
They ask them to test, just taste the wine.
Which one tastes better.
Most of them prefer the five dollar wine
when they don't know the price.
Isn't that interesting?
Everybody go mhm.
But that's not it, here's the kicker.
You ready?
Here's the kicker.
Here's when things get very scary.
The volunteers in the first experiment,
the ones that were shown the prices,
have the brain scanned with a MRI scanner while
they try the wines.
The part of the brain associated with pleasure
was actually more active and the more expensive
they thought the wine was.
Hmm, now what does that mean?
It means this.
It means, in other words, the price label didn't just fool
them on a conscious, logical level:
It actually is more expensive so it must be better.
It's fooled the brain at an unconscious chemical level.
They actually did enjoy the wine more when they thought
it was more expensive and less when they thought it
was cheaper.
Not just conscious, logical level.
When they associate wow, it's actually more expensive,
it must be good, they enjoyed the experience more.
What's the lesson?
Here's this lesson.
Write this down.
People enjoy paying for the things they value
and it seems that the more they pay,
the more they enjoy it.
People enjoy paying for the things they value
and it seems that the more they pay,
the more they?
Enjoy. So my question for you is this.
Why would you want to rob your clients of the simple
pleasure of paying a premium rate for your products
and services?
Why would you want to rob your clients of the simple
pleasure of paying a premium rate for your products
and services?
Not because you're greedy but because
people enjoy paying for the things they value.
It seems the more they pay the more they enjoy it.
The more they enjoy it.
Let me give you two minutes.
How long?
Discuss among your tables about the first three reasons
what I've talked about and how that relates to you
or what experience you've had with this type of
different pricing or buying experience you might
have as well.
Two minutes, go.
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