Even if no one ever buys it, offering a ridiculously expensive product can make your business money.
Just having it there makes slightly less expensive items appear cheap by comparison.
“Think about it,” writes GigaOm’s Mike Speiser, “How many times have you ordered a bottle of wine in the middle of the price range?”
This insight can easily be applied to almost any business. The key, says Speiser, is what behavioural economist Dan Ariely calls “arbitrary coherence”. The idea is that any arbitrary number can be made to serve as a consumer’s anchor for deciding what other products should cost:
[A researcher] held up four items one by one: a cordless trackball, a cordless keyboard and mouse, a design book, and a one-pound box of Belgian chocolates. He passed out forms that listed all the items. “Now I want you to write the last two digits of your Social Security number at the top of the page,” he instructed. “And then write them again next to each of the items in the form of a price. In other words, if the last two digits are 23, write $23.”
“Now when you’re finished with that,” he added, “I want you to indicate on your sheets whether you would pay that amount for each of the products.”
When the students had finished, [he] asked them to write down the maximum amount they were willing to pay for each of the products (their bids).
The students insisted, of course, that thinking about their social security number had no effect on their final bids. But they were wrong: “students with Social Security numbers ending in the upper 20 per cent placed bids that were 216 to 346 per cent higher than those of the students with Social Security numbers ending in the lowest 20 per cent.”
Force customers to think big, and they’ll be ready to spend big.
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