Posted by BJ
A while back my buddy Mike P. of 24 Hour Co. gave me a copy of Predictably Irrational: The Hidden Forces That Shape Our Decisions (Dan Ariely, Harper), I found the information in this book so incredible and so relevant to the work we do I gave a copy of the book to the Jon and our directors.
A while back my buddy Mike P. of 24 Hour Co. gave me a copy of Predictably Irrational: The Hidden Forces That Shape Our Decisions (Dan Ariely, Harper), I found the information in this book so incredible and so relevant to the work we do I gave a copy of the book to the Jon and our directors.
The book demonstrates, through scientifically conducted experiments, that our buying decisions, and how we think about price and cost, are not usually rational and that often, the person presenting the price is actually manipulating how we think about these factors.
An example they give is for buying a subscription to the Economist. In the first example, the choices are:
Option / Price
Internet only / $59
Print only / $125
Print and Internet / $125.
Which would you choose?
In the study presented in the book, when 100 students at MIT’s Sloan School of Management the results were as follows:
Option / Price / No. of students
Internet only / $59 / 16
Print only / $125 / 0
Print and Internet / $125 / 84
The book goes on to ask, “Suppose one of the options was removed?”
Option / Price
Internet only / $59
Print and Internet / $125.
“Would the students respond as before? Certainly they would react the same way, wouldn’t they? After all, the option taken out was one that no one selected, so it should make no difference, right?”
Consider which one you would opt for.
The results from the book are as follows:
Option / Price / No. of students
Internet only / $59 / 68
Print and Internet / $125 / 32
As the book points out, “What could have possibly changed the students’ minds? Nothing rational, I assure you. It was the mere presence of the decoy that sent 84 of the students to the print and internet option.”
The book presents many more “irrational” decisions that are made regarding price and cost. Reading this book has definitely changed the way I think about pricing and costs within the proposals I develop. Like “Made to Stick” discussed in my last post, I highly recommend this book and suggest it be part of your proposal library.
An example they give is for buying a subscription to the Economist. In the first example, the choices are:
Option / Price
Internet only / $59
Print only / $125
Print and Internet / $125.
Which would you choose?
In the study presented in the book, when 100 students at MIT’s Sloan School of Management the results were as follows:
Option / Price / No. of students
Internet only / $59 / 16
Print only / $125 / 0
Print and Internet / $125 / 84
The book goes on to ask, “Suppose one of the options was removed?”
Option / Price
Internet only / $59
Print and Internet / $125.
“Would the students respond as before? Certainly they would react the same way, wouldn’t they? After all, the option taken out was one that no one selected, so it should make no difference, right?”
Consider which one you would opt for.
The results from the book are as follows:
Option / Price / No. of students
Internet only / $59 / 68
Print and Internet / $125 / 32
As the book points out, “What could have possibly changed the students’ minds? Nothing rational, I assure you. It was the mere presence of the decoy that sent 84 of the students to the print and internet option.”
The book presents many more “irrational” decisions that are made regarding price and cost. Reading this book has definitely changed the way I think about pricing and costs within the proposals I develop. Like “Made to Stick” discussed in my last post, I highly recommend this book and suggest it be part of your proposal library.