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> This is all about tricking people, and nothing about designing pricing to match the value provided. Hmmmm... maybe. That said, I would say that they are mor

by csa 7y ago

> This is all about tricking people, and nothing about designing pricing to match the value provided. Hmmmm... maybe. That said, I would say that they are more often just a way for a company to price their products in a way that more accurately reflects the value to the purchaser. The easiest example of this is anchoring. The difference in a pricing page that offers 100-220 and a page that offers 100-220-500 is typically very large, and that’s true even if no one selects the 500 option! Having that high end third option effectively gives folks the permission to select a more expensive option that probably has more utility for them and/or their organization.

pdonis 7y ago
> Having that high end third option effectively gives folks the permission to select a more expensive option that probably has more utility for them and/or their organization You're assuming that just, you know, telling your customers about what extra features they get in the more expensive 220 option isn't enough to persuade the ones for whom it would genuinely add value to choose it. Which means either you aren't communicating your features effectively (and you should fix that instead of worrying about hacking your pricing page) or you think your customers aren't capable of judging what's in their own best interest given accurate information, so you have to manipulate them for their own good. The GP, by saying "this is all about tricking people", is simply expressing what to me is highly justified skepticism about the latter position.
- renewiltord 7y ago
  Or maybe adding the 500 option is the way to communicate your features most effectively. i.e. it presents the top-end of what's possible and accurately showcases where your more expensive option is.
  - pdonis 7y ago
    > maybe adding the 500 option is the way to communicate your features most effectively. Not if nobody actually buys it, which was a premise of that particular example.
    - renewiltord 7y ago
      Especially then. It allows you to proportionally weight the price against what's available. All of this is just effective communication. In fact, considering that all we have available is the end result of the operation, I think the "effective communication" hypothesis is much stronger supported than the "tricking" hypothesis.
      - pdonis 7y ago
        > all we have available is the end result of the operation We have the result that more people bought the 220 option when the 500 option was offered.[ We do not know that still more people wouldn't have bought the 220 option if its features had been effectively communicated. If the 220 option really is a better deal for many customers, telling them so directly would seem to be a better strategy than hinting it to them by providing a 500 option that nobody actually buys. But this strategy was not even tried.
        renewiltord 7y ago
        It certainly was. The features were showcased through comparison and analogy: a common technique to simplify understanding. This technique is frequently used in news (fifteen football fields), in technology (it would take a desktop 1000 years to calculate this), and really anywhere. It’s a damned good technique because it eases understanding.
        pdonis 7y ago
        > It certainly was. I don't see anywhere in the article where it tells how they tried telling customers the advantages of the 220 option and how it would be a better value for them.
- csa 7y ago
  I appreciate what you are saying here, and I used to think that way, too. That said, the more I have learned about psychology and behavioral economics/finance, the more I have come to understand that humans are fundamentally irrational (at least on a surface level). The more I use that as my operating assumption when modeling customer behavior, the more accurate my models have seemed to be. On the surface, that seems to be a depressing assumption to make about humanity. What I have come to understand/believe is that the surface level irrationality of most customers is actually fairly rational once the whole person is taken into account — especially their psychological make up. Using the 100-220-500 example, some people will rarely or never take the highest priced option of something. They use this as a (useful, imho) quick and dirty heuristic to avoid being or being seen as a spendthrift. You seem to be assuming that everyone has the heuristic of “what's in their own best interest given accurate information”, and my data over the decades is that this stance is relatively rare (<10% of a diverse group of people). To be fair, it is a more common amongst the pure/hardcore hyper-logical engineering crowd that are probably much more common in places like HN, but that is a very small percentage of most markets. Note that “not being a spendthrift” is just one common heuristic. Another is “not being or being seen as cheap”. Another is “not being seen as different or rocking the boat” (this is why “most popular” works as a label on an option). Another is “being seen as rich” (some folks will just go in and buy the most expensive option as the default) or “being seen as significant” (patio11 has an example of his Japanese manager not being willing to take a smaller SAAS option because he didn’t want to present the label “freelancer” on an expense request). The list goes on, and these are all very real heuristics that people use to make decisions — and they use these heuristics much more often than a holistic analysis of what is best for them or their organization. Given the above, are these techniques “tricking people”? Maybe. I personally consider them to be tools that can be used responsibly or irresponsibly. An organization with rock solid ethics can use these techniques to hack their users brains to get them to more accurately do what is in the purchaser’s best interest. At least that is my opinion and my approach. YMMV.
  - pdonis 7y ago
    > An organization with rock solid ethics can use these techniques to hack their users brains to get them to more accurately do what is in the purchaser’s best interest. While I agree that people are far from perfectly rational, I strongly disagree with the viewpoint you are taking here. You do not know what is in the purchaser's best interest. Only they do. Remember that the maxim that humans are far from perfectly rational applies to you too. If you think you are hacking users brains in their own best interests, is that really true, or has your own brain figured out a fancy rationalization that lets you do what's in your best interests even if it harms others? My money is on the latter.

by csa 7y ago

pdonis 7y ago

> Having that high end third option effectively gives folks the permission to select a more expensive option that probably has more utility for them and/or their organization You're assuming that just, you know, telling your customers about what extra features they get in the more expensive 220 option isn't enough to persuade the ones for whom it would genuinely add value to choose it. Which means either you aren't communicating your features effectively (and you should fix that instead of worrying about hacking your pricing page) or you think your customers aren't capable of judging what's in their own best interest given accurate information, so you have to manipulate them for their own good. The GP, by saying "this is all about tricking people", is simply expressing what to me is highly justified skepticism about the latter position.

renewiltord 7y ago
Or maybe adding the 500 option is the way to communicate your features most effectively. i.e. it presents the top-end of what's possible and accurately showcases where your more expensive option is.
- pdonis 7y ago
  > maybe adding the 500 option is the way to communicate your features most effectively. Not if nobody actually buys it, which was a premise of that particular example.
  - renewiltord 7y ago
    Especially then. It allows you to proportionally weight the price against what's available. All of this is just effective communication. In fact, considering that all we have available is the end result of the operation, I think the "effective communication" hypothesis is much stronger supported than the "tricking" hypothesis.
    - pdonis 7y ago
      > all we have available is the end result of the operation We have the result that more people bought the 220 option when the 500 option was offered.[ We do not know that still more people wouldn't have bought the 220 option if its features had been effectively communicated. If the 220 option really is a better deal for many customers, telling them so directly would seem to be a better strategy than hinting it to them by providing a 500 option that nobody actually buys. But this strategy was not even tried.
      - renewiltord 7y ago
        It certainly was. The features were showcased through comparison and analogy: a common technique to simplify understanding. This technique is frequently used in news (fifteen football fields), in technology (it would take a desktop 1000 years to calculate this), and really anywhere. It’s a damned good technique because it eases understanding.
        pdonis 7y ago
        > It certainly was. I don't see anywhere in the article where it tells how they tried telling customers the advantages of the 220 option and how it would be a better value for them.
csa 7y ago
I appreciate what you are saying here, and I used to think that way, too. That said, the more I have learned about psychology and behavioral economics/finance, the more I have come to understand that humans are fundamentally irrational (at least on a surface level). The more I use that as my operating assumption when modeling customer behavior, the more accurate my models have seemed to be. On the surface, that seems to be a depressing assumption to make about humanity. What I have come to understand/believe is that the surface level irrationality of most customers is actually fairly rational once the whole person is taken into account — especially their psychological make up. Using the 100-220-500 example, some people will rarely or never take the highest priced option of something. They use this as a (useful, imho) quick and dirty heuristic to avoid being or being seen as a spendthrift. You seem to be assuming that everyone has the heuristic of “what's in their own best interest given accurate information”, and my data over the decades is that this stance is relatively rare (<10% of a diverse group of people). To be fair, it is a more common amongst the pure/hardcore hyper-logical engineering crowd that are probably much more common in places like HN, but that is a very small percentage of most markets. Note that “not being a spendthrift” is just one common heuristic. Another is “not being or being seen as cheap”. Another is “not being seen as different or rocking the boat” (this is why “most popular” works as a label on an option). Another is “being seen as rich” (some folks will just go in and buy the most expensive option as the default) or “being seen as significant” (patio11 has an example of his Japanese manager not being willing to take a smaller SAAS option because he didn’t want to present the label “freelancer” on an expense request). The list goes on, and these are all very real heuristics that people use to make decisions — and they use these heuristics much more often than a holistic analysis of what is best for them or their organization. Given the above, are these techniques “tricking people”? Maybe. I personally consider them to be tools that can be used responsibly or irresponsibly. An organization with rock solid ethics can use these techniques to hack their users brains to get them to more accurately do what is in the purchaser’s best interest. At least that is my opinion and my approach. YMMV.
- pdonis 7y ago
  > An organization with rock solid ethics can use these techniques to hack their users brains to get them to more accurately do what is in the purchaser’s best interest. While I agree that people are far from perfectly rational, I strongly disagree with the viewpoint you are taking here. You do not know what is in the purchaser's best interest. Only they do. Remember that the maxim that humans are far from perfectly rational applies to you too. If you think you are hacking users brains in their own best interests, is that really true, or has your own brain figured out a fancy rationalization that lets you do what's in your best interests even if it harms others? My money is on the latter.