How Prices are Relative
Which one would you pick? A study shows that 68% of you would pick option A, and 32% would pick option B.
OK, how about if we add in one more option:
A) Web only subscription – $59
B) Print only subscription – $125
C) Print & Web subscription – $125
No, there’s no typo. Option B and C are the same price, but option B is missing the web access. Now which one would you pick?
Surprisingly, by adding in a dummy option with the same price, the study says that only 16% of you would pick option A, none of you would pick option B, and a whooping 84% would pick option C. Want to know why? In short, because we often judge value relatively. A choice is good because it is better than the other choices, not because of the intrinsic and objective value of it. Think you can use this to your business advantage?
Find out more about these sorts of psychological quirks in this book.