This is Dan Ariely’s “Decisions to Exploit in Business and in Life”.
I’m Alex Berman from Experiment 27.
Dan Ariely is the author of this book, “Predictably Irrational: The Hidden Forces that Shape Our
Decisions”.
Worth checking out.
The gist of this book is it’s all about what sort of environmental factors affect
the way that we make decisions.
So it’s a lot of fallacies and a lot of real life examples that influence the way
we make decisions.
Putting a lot of this stuff into practice will help you sell more and become a better
business person so here are the takeaways.
Number one is “The truth about relativity”.
The example he gives in this book is about the Economist.
Basically the Economist is a magazine they wanted to offer two subscription options.
Internet only subscription for $59 and the print-only subscription for $125 but they
found that more people were going to that Internet-only subscription and they weren’t making enough
money.
They need to increase their print subscriber rate.
So what they found by adding a third option which was print and internet subscription
for $125 they could increase the number of people that signed up for that third option
thus increasing print.
And the takeaway here, the big thing, is that people don’t compare
price based on what the value is to them, they compare prices based on the other prices
they see.
So when you see, as a consumer, the Internet-only subscription for 59 bucks, you think, “Oh
that’s a good deal”, and the print-only subscription you think, “Oh that’s not
a good deal.”
But when you see print and internet subscription for $125, you see that as being a better deal
than the second one and maybe even a better deal than the first one because you get two
things for that same larger price and you’re more likely to go to that one.
The other thing that Dan Ariely points out in this book is, the fallacy of supply and
demand.
For pricing the first price a customer hears is going to be that price that is anchored
in their head.
So for instance if they are looking for marketing services like they’re looking to buy from
us and they talk to a vendor and the first person they talk to says their services are
$15,000 a month, whether or not the customer thinks that’s a rip off or not that is the
price in their head.
So if I come and say that we’re $25,000 a month, they’re gonna say, “Oh that’s
more expensive.
That’s pretty expensive.”
Or if I say we’re $2000 a month the customer immediately is gonna say, “Why is this so
much cheaper than the first guy?”
So that initial anchor, being the first person to give a price could actually help you if
the person is talking to multiple vendors.
Because it puts you in that position of power where you control now what the customer is
going to think.
This is also a reason why people say publishing your prices on your website is a good idea
because it gets the customer ready for price negotiations ahead of time.
Number three is the problem of procrastination and self-control.
Dan Ariely says that if a person sets their own deadline and it’s a clear date and time
that a thing has to get done, they’ll get it done.
They’re more likely to get it done than if they had no deadline or if the company
assigned a deadline.
You can use this with your employees where basically if you give them a range so let’s
say you have a client deliverable and the presentation is on Friday.
If I say, “Hey the presentation is on Friday and we need it done by Thursday at 2pm.
Does that work?”
I’m a lot less likely to have it done on time than if I say, “Hey it’s due Friday.
When do you think you’re going to be able to get it done?
We need it at least 24 hours before then” and I let my employee give me time.
Even if that time’s the same, even if it ends up being Thursday at 2pm, according to
Dan Ariely’s research my employee is going to be more likely to deliver on time.
The other one is the high price of ownership.
Dan Ariely points out that we value our own products and services a lot higher than other
people do.
The IKEA Effect states that we don’t like giving things back once we own them.
And we tend to value our own stuff more highly that other people's stuff.
“Our aversion to loss and feel of ownership dictates that we hang on to it.”
This is also why Casper Mattress does their, whatever that long guarantee is, like 120
day guarantee on their mattress cause they now once you own this mattress you’re sleeping
on it, it’s part of your lifestyle, it’s part of your habits.
You’re not gonna give this mattress back after 120 days unless it’s really really
bad.
Two more to cover, the first one is the effect of expectations.
Which states, and I quote, “When we believe beforehand that something will be good, generally
it will be good – and when we think it will be bad, it will be bad.”
This is the effect of expectations.
If someone comes in and they expect your service to be great, they’ll be looking for reasons
why it’s great and it will tend to reinforce itself.
Same thing if it’s bad.
They’ll be looking for reasons why you’re screwing up or why it’s bad.
This is also what Jack Ma was relating to when he talks about the Forrest Gump Effect.
Which we also did a video on that’s worth checking out.
The last one is the power of price.
The more expensive something is, the more you value it and the more value it has to
the customer.
So a customer is going to get more value out of a service that costs $10,000 versus a service
that costs $200.
Not just because the abilities of person doing the service might be higher if they’re charging
$10,000 but Dan Ariely says that’s also because the price is higher.
Right?
If a company pays $1.5 million for an all in mobile applications stack, iOS/Android/Web,
they’re gonna value that a lot more and they're gonna care a lot more about it than
if they had bought the same type of application off of Upwork for 20 grand.
And this is something you can use for your advantage.
And this is actually another argument for raising your prices and using value based
pricing.
If you liked this video feel free to give it a thumbs up on YouTube to encourage this
type of content.
Subscribe to this channel for more B2B sales training.
And if you need marketing support for your digital agency check out Experiment27.com.
Thanks!