In my last post on the psychology of money, I looked at pricing through the lens of the SNAPP behaviour framework. I left out many examples due to time and space, especially under the theme of PATTERNS, where there are many well known examples of Framing and Priming of behaviour. In this article I will focus on some more examples of the importance of PATTERNS in human decision-making, especially in how the brain interprets pricing and value. Read more »
“Price is what you pay. Value is what you get.” - Warren Buffett
Price is definitely not the same as value, although classical economics continues to assume it is. In their rational models, economists (and many researchers) believe that humans are calculating machines summing up the costs and benefits of a decision with perfect information and reaching a rational conclusion (so-called Homo Economicus). The reality is quite different, in that many of our decisions are habitual (automated) and those that aren’t are most often made by using simple heuristics (mental rules of thumb) as proxies for more effortful analysis of what to do. Read more »
This is the time for sales and promotions around the world, from the madness of Black Friday to the January Sales that promise to give us so much more for so much less. But are sales and discounting really in the interests of business and brands? The evidence is pretty clear – the answer is a resounding NO.
“They know the price of everything and the value of nothing.” - Oscar Wilde
Priceless is a great read for anyone who wants to explore the psychology behind pricing (and currently only one of two books that really addresses this topic – I’ll be reviewing the other soon). Although it lacks an overall storyline and structure, the book is easy to read (spread across 57 chapters) and full of anecdotes and case studies. It contains extensive discussions of some of the underlying theories which can help explain some of the strange and quirky ways in which humans deal with issues of money, most notably those of behavioural economics and its chief spokesperson Daniel Kahneman. Read more »