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 |
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.