Every Marketer MUST Understand This Principle Without Fail...

22 replies
Hi Folks

I'm just starting to re-read Dan Ariely's excellent book Predictably
Irrational
, and this statement I think is well worth quoting (p2), bold is
mine:

"Humans rarely choose things in absolute terms. We don't have an internal
value meter that tells us how much things are worth. Rather, we focus
on the relative advantage
of one thing over another, and estimate value
accordingly. (For instance, we don't know how much a six-cylinder car is
worth, but we can assume it's more expensive than the four-cylinder
model.)"


As marketers, it's a good idea to KEEP THIS PRINCIPLE IN MIND when
making pricing decisions.

For example, some people are shocked to hear that they can get $50 for a
500 word article.

Why? Because here, in the Warrior world, we are used to seeing "$5 or
$10 an article" specials, etc... so relative to what we're used to seeing
here, $50 sounds like a lot of money to ask for.

However, step out of our "little" Warrior bubble, and there is a world of 6.7
BILLION other people (of whom over 1 BILLION are now on the Internet),
who might want content written for their own reasons. To them, $50 might
actually be incredibly cheap!

Perhaps, then, your marketing strategy could involve thinking a little bit
bigger, and also a little bit more sideways... i.e., why might other people
(outside our Warrior bubble) want content? And how could you reach
them?

A quick example to get your mind whirring...

- Newcomers to the Internet, who want to "set up their own Internet
business" might want an instant 50 post SEO optimized blog set up. Why
not sell this kind of service as an "instant business" to newcomers, for
$1,000 - $1,500 ... that''s at least $20 a post.

(Don't tell me people won't spend that kind of money - remember, over
500 people spent $2K with Frank Kern when he launched Mass Control the
first time in 2008... so why wouldn't someone pay $1K to have a
ready-made business for them? Think about it.)

In other words, don't just "sell articles"... think outside and above the box.

How ELSE does this concept of relative advantage affect us as marketers?

Discuss.
#fail #marketer #principle #understand
  • Profile picture of the author Kevin AKA Hubcap
    Hi Paul,

    The same is true for most things especially services prevalent here on the forum.

    Take web design and video production. I see great deals in the Warriors For Hire section and to me they seem quite low.

    There are offline businesses that will pay multiples of what these warriors are charging. Alternatively, the Warriors For Hire section gives service providers immediate access to a hungry market without doing much legwork but those willing to expand their vision will be pleasantly surprised by the "normal" prices outside of the forum.

    Kevin
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  • Great idea at thinking outside the box. With every service available, there is a unique angle that can allow you to charge more, get more competition and create a strong reputation for you.

    Instead of throwing up a thread offering a service, take an hour and meditate on different angles to offer your boring service that everyone else offers.
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  • Profile picture of the author grumpyjacksa
    the only reason why articles are so cheap hee is because some many people can write around here....

    to someone unfamiliar to writing proper kw researched articles, $ 5 may sound like backyard quality....

    just my 0.02c
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    • Profile picture of the author KarlWarren
      Originally Posted by grumpyjacksa View Post

      just my 0.02c
      And this is the problem... undervaluing your own work. This contribution was easlity worth $20

      In all seriousness though - confidence plays a big factor, and so do comfort zones. If you're going to offer cheap deals, have a REASON for doing it - a loss leader perhaps. Because if you can't capitalise on it, you're just doing tons of work for little reward. Have the balls to charge top rates - and people WILL pay, providing they (and you) think you're worth it.
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  • Profile picture of the author Adam B
    Value is all about perception. You could sell the same product at both $50 and $150 it all depends on what people perceive the value is.

    Its done all the time in retail and online, the same products re-packaged for different markets and different social and demographic groups.

    In the UK we have Tescos a assive retail supermarket chain, like Walmart in the USA.

    Tescos repackage things all the time, they target differrent shoppers with similar products under different labels and pricing. Some of these products are identical they are just in different packages and labels.

    At the start of the "credit crunch" Tescos introduced "Discount Brands" most of these brands have been invented by Tescos and are the same products they already had instore just re packaged. The other day I went to buy a jar of tomato pasta sauce. I had several choices of brands and tescos own brand. What was interesting is their new "discount brands" brand was identical to Tescos own brand. The ingrediants were identical and the rear label of the jar was also identical to the tescos wn brand. It was only the front label that was different and oh, the price. The discount brands was 79p and the tescos own £1.00 They were identical ingrediants and quantities and identical rear labels so I bought the cheaper one.

    Again I hope that illustrates my point. You could sell the same product at 2 or 3 or maybe 4 different price levels just repackage your front end to cater for each market. Its done all the time.

    What matters is perceived value.
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  • Profile picture of the author Andyhenry
    Wise words.

    This is actually the fundamental principle behind upselling.

    When you go to buy a new suit - they show you the jackets and trousers first, so that the 'relatively' smaller price of the shirt, tie and even shoes don't give the pain they would if they just started with "and here's a nice £35 tie".

    Andy
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    nothing to see here.

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  • Profile picture of the author actionplanbiz
    How Can a restaurant get More Orders of their Most Expensive dish?

    Make the 2nd Most expensive Dish the Most Expensive.
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    • Profile picture of the author JohnMcCabe
      One thing I haven't seen mentioned yet is the tremendous value in the quote Paul shared. As marketers, we can make our jobs easier by setting the comparison.

      For example, I was watching golf on TV the other day, and an ad for a Saab car came on. They didn't compare the Saab to a Benz or a Cadillac or even a Rolls. They compared it to a private jet costing multiples of what the car cost.

      By buying the Saab auto, you were getting the same precision engineering that went into a plane with a Saab jet engine.

      It's much easier to create favorable value comparisons when you get to pick both sides of the scale...
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      • Profile picture of the author Frank Donovan
        Originally Posted by JohnMcCabe View Post

        By buying the Saab auto, you were getting the same precision engineering that went into a plane with a Saab jet engine.
        And you might even forget that the jet engine was made by Volvo



        Frank
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        • Profile picture of the author Kevin AKA Hubcap
          Originally Posted by Frank Donovan View Post

          And you might even forget that the jet engine was made by Volvo
          Frank
          More likely made by Pratt & Whitney, Rolls Royce, or General Electric with some manufacturing support provided by Volvo.
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      • Profile picture of the author Paul Hancox
        Originally Posted by JohnMcCabe View Post

        One thing I haven't seen mentioned yet is the tremendous value in the quote Paul shared. As marketers, we can make our jobs easier by setting the comparison.

        For example, I was watching golf on TV the other day, and an ad for a Saab car came on. They didn't compare the Saab to a Benz or a Cadillac or even a Rolls. They compared it to a private jet costing multiples of what the car cost.

        By buying the Saab auto, you were getting the same precision engineering that went into a plane with a Saab jet engine.

        It's much easier to create favorable value comparisons when you get to pick both sides of the scale...
        Precisely, John.

        The terms cheap and expensive are ALWAYS in relation to something else. If you're selling something that might be considered "expensive", then change the frame of reference.

        And as @Razer Rage pointed out, it can work both ways. If a product with huge claims is priced too low, it might simply lose value in the potential customer's eyes.

        @Adam B, about the "Discounted Brands"... interesting! You'd have thought they'd at least change the ingredients.

        Sometimes I envy supermarkets... just think of the masses of pricing and buying data they have, and they know just how people will react to them.

        I'd love to know how many people still bought the higher priced beans, given that they had exactly the same ingredients... I bet lots do
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        • Profile picture of the author JohnMcCabe
          Originally Posted by Frank Donovan View Post

          And you might even forget that the jet engine was made by Volvo



          Frank
          OOPS, you're right. It was a Volvo ad come to think of it...
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          • Profile picture of the author Jill Carpenter
            Do you read, and re-read at the same time with your double pupils?
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        • Profile picture of the author Katie Rich
          Originally Posted by Paul Hancox View Post

          I'd love to know how many people still bought the higher priced beans, given that they had exactly the same ingredients... I bet lots do
          Yup, they do. I do. It's branding. We are conditioned to believe that some things are just so much better than others even though they are more expensive.

          Heinz beans, nothing else, no matter if the ingredients are exactly the same as the cheaper version. Maybe there is a lesson there too. Branding ....
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          • Profile picture of the author JohnMcCabe
            Originally Posted by Katie Rich View Post

            Yup, they do. I do. It's branding. We are conditioned to believe that some things are just so much better than others even though they are more expensive.

            Heinz beans, nothing else, no matter if the ingredients are exactly the same as the cheaper version. Maybe there is a lesson there too. Branding ....
            I realize that in many cases the only difference between a brand name item and a store label item is the label, but it's not always true. Even if the ingredients are exactly the same.

            I'm a fair-to-middling cook. My late grandfather was a master chef at a fine dining restaurant (AAA 5-diamond rating). Hand both of us the exact same basket of ingredients, and I guarantee you that you could tell who made which plate.

            So our household experiments with store brands, but we tend to stick with whatever we decide we prefer, regardless of small price differences.
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  • Profile picture of the author Steve Ranger
    Sorry to dig up an old thread but this really is
    so 'on point', I'm going to get a copy of Predictably
    Irrational today. Thanks Paul.
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    • Profile picture of the author BrianMcLeod
      Originally Posted by Steve Ranger View Post

      Sorry to dig up an old thread but this really is
      so 'on point', I'm going to get a copy of Predictably
      Irrational today. Thanks Paul.
      Some "old threads" DESERVE to be resuscitated...

      Especially as we head into the new year!

      Paul's posts are ALWAYS worth reading and this
      one just didn't get enough play first time around.

      : )

      Brian
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  • Profile picture of the author Joseph Ratliff
    And then...there is the believability factor that comes with pricing your services so low...because people also tend to associate low dollars with "cheaper" quality (not in every situation, but generally).

    So in Paul's excellent example, you're moving past the "$ per article" discussion by offering something of higher perceived value overall.

    And, we haven't even broke ice on the soliciting objections (not overcoming, soliciting) part of selling that ties into what Paul posted.
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