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People Are Clueless About Price

People, including your clients, are clueless about price.

They are not even sure if the price you have given them is reasonable or not.

This isn’t a mere claim, science actually proves this.

How do I know this?

Research in a branch of science called psycho-physics, has shown that the area in our brain responsible for making monetary judgments, is the same as the area that makes sensory judgments.

Therefore, the human brain makes judgments based on color, taste and smell in the same way that it makes judgments about numbers and prices.

In essence, psycho-physics means that humans are sensitive to differences, rather than absolutes.

Some Examples

A classic example would be that despite the presence of CMYK and RGB scales, if someone was presented with two shades of one color, let’s say red, they would most likely not be able to tell what exact shade it is, but they would be able to tell which one is lighter or darker.

Similarly, if someone was asked to state the weight of two given boxes, they would perhaps be unable to estimate the exact weight of each box, but would easily tell which box is heavier than the other.

Correspondingly, when we look at prices, we are sensitive to differences, rather than absolutes.

Relation to Pricing

Not just our customers, all of us, when presented with a price, tend to look for comparisons and contrasts to determine whether that given price is reasonable or not.

For instance, if you had to get some painting work done for your house, you will ask a few painters for their quote and it is highly likely that your decision will be based on the most reasonable option available.

The same applies to your customers.

Therefore, as business owners, we need to show our customers that the price we are charging them is reasonable and represents good value for money. We need to give them several packages and contrasts so that they can make a comparison and believe that the amount they are going to pay us, is going to be worth it.

So, as a business owner, are you doing the same?



 

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