How to price anything: The psychology of why we’ll pay what we pay

https://crew.co/backstage/blog/the-psychology-of-pricing

84 20 10 years ago

cyborgx73• 10 years ago

Is it me or are marketing people and economists just incapable of not sounding like scumbags?

The "trap" that is the Labor Theory of Value may not be the most profitable but maybe it's the most ethical, both compensating the workers fairly and not ripping off the consumer. But why try to have ethical buisness practices when you could just exploit people's base instincts to maximize your profits?

igf3• 10 years ago

The "trap" that is the Labor Theory of Value may not be the most profitable but maybe it's the most ethical

The labour theory of value doesn't even logically hang together in any way, when you think about it.

Okay, let's suppose I spend a whole week making a giant sculpture of a dog turd out of macaroni and glitter (suppose also that I've done a terrible job even within those parameters). What is the value of that dog turd? According to the labour theory of value, it's worth quite a lot... but nobody is actually going to be willing to exchange anything else of value for it. So in what sense does it have value?

rukuu001• 10 years ago

Could get traction on Kickstarter with a good video.

cyborgx73• 10 years ago

Yes, amount of Labor doesn't always determine value. But this article isn't really about value, is it? It's about pricing.

damptowel• 10 years ago

Relevant: https://en.wikipedia.org/wiki/Transformation_problem

I assume the only objective way to calculate value would be to see the planet as a dynamic system, put a baseline price on energy and do some kind of thermodynamic accounting of every transformation process in the chain, basically energy expense bookkeeping. I'm aware there's some theories about this, but I never looked into any of it.

Olscore2• 10 years ago

It's you.

Your last question is loaded; it assumes maximizing profit is bad. In practice high profit margins are often a reward for being first to market. Maybe those high margins are a recompense for R&D costs. Plenty of answers to rebuke your suggestion that maximizing profits is unethical. It's also a situational topic made more nuanced by the specific product, company and many other circumstances.

cyborgx73• 10 years ago

This article says nothing about compensation for heavy R&D costs. It doesn't concern itself with develpment and production costs at all. It is just describing ways in which consumers can be manipulated into spending the highest amount of money possible.

Rexxar• 10 years ago

  > Your last question is loaded; it assumes maximizing profit is bad.

Or he just assumes that maximizing profit is not always good?

wfo• 10 years ago

Your response is loaded as well: you describe maximizing profits, but you don't describe the scenario required for this to be a good heuristic: a functioning market made up of primarily rational consumers who choose the best product based on its merits and cost.

But we have found that spending money on trained psychologists (or schemes developed by them) who abuse natural human tenancies to trick consumers into irrationally spending money or more money on your products is very effective at maximizing profits. But it simultaneously removes the condition that's required to make maximizing profits a good thing.

Fraud is also very profitable.

cylinder• 10 years ago

I tried to ethically and fairly provide my professional services. Clients ended up going to the shady, incompetent and dangerous providers because they used scare tactics and charged 3x more than me. The clients thought this high price meant they were higher quality.

Not all, but some. I stuck with my fair pricing because I believe it's the right thing to do and it pays off long term. But these psychological factors definitely matter.

bitJericho• 10 years ago

It's not the right thing and doesn't pay long term. Charge three times as much, don't use scare tactics if it's not something you should do, discover that you have more clients paying 3 times as much. And now they're using you and not some scammer.

dantheman• 10 years ago

The labor theory of value is fundamentally misguided and will lead to a misallocation of resources. Market signals allow people to coordinate their activities. If housing is getting more expensive it means that it will be more profitable for me to build houses instead of something else, then I'll do it. Eventually housing will get cheaper and I'll move on to the next thing.

igf3• 10 years ago

Even crazier, the physical size of your font can influence peoples’ understanding and feelings about it.

Now, I wonder if I can make this work the other way around. If I'm making an offer on something, I wonder if it's more likely to be accepted if I write it in giant numerals.

I don't think the many-syllables thing is likely to work, though, if I offer some crazy non-round number then my bargaining partner is likely to just come straight back with "How about we round it up to...?" -- though I suppose that could be useful if even the rounded-up number is a nice low one.

caminante2• 10 years ago

I found another site with a "more substantial" list of these strategies and noticed a few "similarities" [0] (e.g. Google " The saliency of the payment (e.g., we feel more pain if we see money leaving our hands)" and look for results.)

It appears crew.co scraped content without citation to market their webdev services.

[0] http://www.nickkolenda.com/psychological-pricing-strategies/

superchink• 10 years ago

This is a pretty serious accusation, so I did have a quick look.

I don't see any grounds for your statement that they scraped the content.

In fact, both the OP and your linked article clearly cite the exact same paper that they both took your referenced content from.

caminante2• 10 years ago

  I don't see any grounds for your statement that they scraped 
  the content.

I appreciate you looking over my shoulder and giving your take. I'm using (maybe misusing) "scraping" interchangeably with "plagiarizing."

  In fact, both the OP and your linked article clearly cite the
  exact same paper that they both took your referenced content
  from.

Citing the paper isn't the concerning bit. Did you find the full example phrase I mentioned anywhere else[0] on the Internet (aside from the blog)? From what I could tell, the phrase isn't in the research paper. That and other phrases seems like OC that was lifted without citation.

[0]https://www.google.com/search?hl=en&safe=off&output=search&s...

How to price anything: The psychology of why we’ll pay what we pay

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