Psychological “B.S.” Pricing Explained with a Blender
You have a choice: you’re looking at a high-end blender putting out 900 Watts of power for $119 or and identical blender putting out slightly more power (1000W) for $179.
Would you be willing to pay an additional 50% for a minimal 11% gain in power?
Probably not – this doesn’t sound like it stacks up value wise.
That’s not the only issue though, $119 is a pretty expensive blender. There are cheaper ones in other brands.
You scroll further and notice there’s a third identical blender available, only it puts out 600W for the same price as the 900W option.
Now after seeing the new option, the 900 sounds like a pretty good deal, it represents a 50% increase in power compared to the 600 for no extra cost.
Given that the only relationship between price and model is power output, it’s a fair call to say more power is better when it comes to home blenders. That raises the question: who buys the clearly inferior 600W model?
Make no mistake, they’re in the business of selling you a 900W blender.
Here are some of the tactics employed:
They say the best way to sell a $2000 watch is to put it next to a $15000 watch. Nothing is either expensive or cheap on its own, the price is always judged relatively.
Another good example of a price anchor is Steve Jobs announcing that the price of the iPad is “not $999, but instead only $499”. With no comparison available if he just said $499 would that be expensive or not?
The anchor price here is the 1000W model, which for all purposes is the same in form and function as the 900W model yet 50% more expensive.
If you were going to design a line of blenders varying only by power output you could logically assume that price would be set relative to power, and you would make evenly spaced steps in power. Perhaps: Small, Medium, Large?
The intentional asymmetry in price and power leaves you thinking the middle choice is 1) relatively cheap and 2) it represents good “bang for the buck” on power output:
- Options 600 or 900: Identical price, large power difference
- Options 900 or 1000: Large price difference, small power difference
Without the comparison models, one inferior in each dimension, the 900 model would just be an expensive blender on a website.
Why I’m explaining the psychological concepts of B.S.
While I don’t sell blenders, I do sell software to businesses that employ shift-workers. These people are industrious, straight shooters (“do-ers”) who are able to smell B.S. pricing from a mile away.
The same psychological pricing tactics applied in selling blenders are applied on near every subscription-based software pricing page, only software is usually harder to compare than the power of a blender.
I think complex pricing pages full of decoys give explanations of why silicon valley hasn’t yet figured out this segment of the market, and why we make world-beating workforce software (with one price) out of Australia (almost all silicon valley software is made for white collar workers).
…at very least, next time a friend says they bought a Nutribullet, ask them: “did you get the 900 series?”
Industry Insights |
Below average staff performance? Time to look at your onboarding process
Do you remember your first day at work? Did your manager show you the ropes, or did you have to figure things out by yourself? Was your desk already set up, or did you wait a couple of days? All these questions are important in onboarding, or the process of orienting new employees for their productivity, retention, and overall growth in the company. The process includes completing documents, introducing the new hire to company culture, setting goals, and monitoring initial performance. It’s a tall order, and a really important one, for a couple of reasons. First, hiring is expensive. This is the first truth of human resource management. However, companies that invest in hiring but not onboarding are effectively throwing their money away. Employees who have a poor initial experience with the organisation will be searching for another job within three months. A high turnover rate means ineffective management and heavy costs for the company. Second, retention is profitable. Businesses that have great onboarding processes can expect to nearly double their corporate revenue growth and profit margins. This is because the better the onboarding process, the more invested employees are. Some of the biggest and most profitable companies in the world have the best onboarding processes. Among them are Twitter, LinkedIn, and Google, where new hires are immersed in employee culture by tailoring the experience to their role. There is a very clear link between onboarding and business success. Still, many companies fail to create good onboarding programs, if any at all. In a survey by ALEX Asks, only 52.3% of respondents said they have an official onboarding program at their company. Whether it’s due to complacency or to the HR team simply having too much on their plate, a poor program means poor overall performance. So how can your company ensure that your onboarding process is a good experience for all your new hires? Start before Day 1 Onboarding doesn’t begin on the first day of work. In fact, if you do this, then you’re already far too late. A manager or company representative needs to get in touch with the new hire weeks before their scheduled first day. What may seem like a regular day to the rest of the company is a milestone for the new hire. It helps to prepare them mentally and emotionally. One important thing to get out of the way immediately is the submission of employment requirements. This includes social security numbers and permits, if necessary. Having a checklist of requirements helps, but paperless onboarding through mobile apps is a much faster way of doing it. No more data entry for managers, no more missing files, and progress can be tracked so you know if the new hire has already completed their details. Companies with an elaborate set of requirements hesitate using software and apps because it limits what they can or cannot ask for. Some onboarding apps allow a custom onboarding system, providing a solution to this problem with a unique drag-and-drop system that lets managers choose which requirements will appear on the employee’s app. Managers are free to add what they need and remove what they don’t. Learn more about custom onboarding apps here. Read more: Achieving Workforce Success: Becoming a Data-driven Workforce Pull Out the Stops on Day 1 Making your new employee feel special only requires a few adjustments to your current program. For example, a simple welcome email goes a long way in making a great first impression. This may seem like a common sense concept, but according to ALEX Asks, 49.5% of new hires said their manager didn’t send a welcome message, while 22.8% of respondents didn’t receive a welcome from anyone at all. Managers should also be available to welcome the new hires and introduce them to the rest of the team. The same ALEX Asks survey revealed that 12.3% of new hires didn’t meet their managers on their first day. While scheduling conflict is sometimes unavoidable, HR teams should work out a good schedule for a new hire to start. Employees are more likely to feel confident and motivated if they get the proper welcome from their manager. But managers don’t need to do everything themselves. The entire team has a stake in getting the new hire integrated as fast as possible, so onboarding responsibilities can be spread out. As the week progresses, you can schedule one-on-one lunches with the new hire and other employees. They can use the time to discuss serious matters like KPIs, and less serious ones like where the best place to get coffee is. All this contributes to helping the new hire fit in. Read more: William Gooderson’s 8 Characteristics of Good Managers Keep Going! (Don’t Stop at Just 1 Week) Most employers stop the recruitment process once they’ve got a signed contract, a major blunder that has negative consequences on an employee’s growth and the company’s bottom line. Conventional wisdom suggests 100 days of onboarding is ideal, but one month or less is more realistic for many of today’s companies. A 2017 CareerBuilder survey showed that 21% of companies have a month-long onboarding process, while 25% only take a day. Only 11% are closer to having a 100-day process. It is unrealistic to expect an employee to be able to fully understand their role and fit in after just one week. Becoming immersed in employee culture takes time and resources, and the entire team needs to get involved. Plan activities for the new hire that will show them, rather than tell them, about what your company stands for. As time progresses, goal setting for the employee and initial monitoring should still be considered part of the onboarding process. Other company initiatives like mentorship can also be incorporated into the onboarding checklist. While the length of onboarding time may differ across companies, the principles remain the same: ensure retention and productivity in the most efficient way possible. It may seem like a tall order to create a stellar onboarding process, but it helps to invest in a workforce management system that handles some of the work for you. That way, you can save money on tedious tasks, and allocate more resources into developing the newest member of your workforce. Curious to know more about a workforce management system that provides custom onboarding? Book your free demo today.
Industry Insights |
How to Serve 200 Customers Daily in an 8-seat Restaurant
Breaking down the cost of eating a fine meal there’s a lot you pay for on top of the transactional value of buying and preparing food. Being waited on in an architecturally designed restaurant in a prime location is great. But what if you want the same quality food without the premium price? As the case goes for Australia, to get a fine dining meal here, you’ll also be paying for self-inflicted operational inefficiencies. We’re largely talking: Capital and operational expenses of having a large fancy venue Staff who perform various activities that don’t directly pertain to the preparation of food Time consumed in a long seated meal that prevents the venue from turning over the table several times during service But this isn’t the case in many places of the world – I recently travelled to Japan where I discovered good food can be purely transaction. It’s usually in an alleyway and the people who greet you also cook your food. In Japan, many well-regarded restaurants have no front of house staff at all. Many don’t have a human taking your order. Here’s one example I encountered: I picked this example because it has a western counterpart – a high-end steak restaurant. The place is called Le Monde, located in Shinjuku, and it’s tiny. There’s 3 staff, there’s no time of the day that doesn’t have a line and the dining room has 8 seats. Here’s how they do it Eliminate menu choice. What do you want? We have steak, steak, and steak. There is no question as to what you’re ordering. It’s going to be steak and it will be cooked medium-rare. The only question is what cut you will be ordering. Each steak comes with an exact amount of thick cut potato chips, a small number of greens and a tiny amount of rice. The result is an ultra-low wastage restaurant with a hyper-efficient kitchen process. Efficient design. This place is evidence that if you design your restaurant with the efficiency of a Toyota plant you can serve up high-value food at a low price. Those waiting outside observe the menu, the one front of house team member takes your order at the door. You then progress to a standing line inside. The chefs watch the progress of seated customers and line up the steaks to match the inside line of customers. A perfectly timed steak hits the grill, you simply sit and a steak goes directly from the grill to a plate in front of you within 30 seconds. You then leave promptly after finishing your meal because people are looking at you waiting for your seat. Here’s a technical diagram I put together in the early hours of the morning: No time for talking. There’s dead silence in this restaurant. The feel is part fine dining restaurant with quiet jazz music and a little bit like a solemn funeral. You sit, you eat, you leave. This is in part because you’re eating to an audience of other people waiting for your seat. Never an empty seat. Empty seats are dead money. Hospitality operators pay for the seat and the square meter it sits on for one reason – to make money from it. By having a small footprint, every seat makes money. Restaurant wastage comes in many forms, and ultimately the consumer pays for it somehow. The same goes for wasted seats and square meters, if you’re eating in an empty restaurant there are only two options: you’re either paying for the empty seats in your meal price or the operator is going backward. I walked past at all hours of the day and never observed this place without a line to get a seat. Aces in their places. Unlike my fellow diners who looked down at their meal and only looked up to pay, I took a good look at how the kitchen operated. The simplicity created insane efficiency. Everything had its place and each meal was prepared like clockwork. All perfect. Always on time. Here’s the staff setup: 1x FOH staff member takes care of the dining room, takes orders and prints the bill. 1x Chef manages the grill. They observe the eating progress of seated customers and ensure everything is ready to go in order of those in line. 1x Chef manages the sides and plating, and everything else that happens in the kitchen. Insane value. This is a subjective statement but rings true if your goal though is to eat fine dining food at takeaway prices. This is achieved by eliminating all of the activities that are non-value adding to you getting a quality steak cheap and fast. The result: a restaurant quality steak for a fast food price. It’s a place where well off business people and broke backpackers eat side by side. Something you won’t see often in Australia.