Pricing in s SNAPP: The psychology of money
Presentation on the psychology of money and decision-making, including its impact on business and brand value. This was first presented at Asia Research Seminar in Jakarta on 11 June 2015. If you would like to see a longer version of the presentation with additional examples.
Published on: Mar 4, 2016
Transcripts - Pricing in s SNAPP: The psychology of money
Pricing in a SNAPP: !
The psychology of money!
11 June 2015
Price is not the same as value
Warren Buffett KU Visit" by Mark Hirschey - Work of Mark Hirschey. Licensed under CC BY-SA 2.0 via Wikimedia Commons
Rational calculation or intuitive heuristics?
SNAPP behaviour framework & card game
The paradox of choice
Less is more - that means more sales!
Procter & Gamble have found that fewer SKUs can
mean more sales. In one case, reducing 24
detergent SKUs to 15 increased total sales by 10%.
Small differences can make a difference when
direct comparisons are being made
Source: Kim, Novemsky & Dhar, Adding Small Differences Can Increase Similarity and Choice, Psychological Science, 2012
Follow the crowd
Intrinsic motivations are more powerful
than extrinsic ones
"Dan Ariely - PopTech 2010 - Camden, Maine" by PopTech - Flickr: Dan Ariely - PopTech 2010 - Camden, Maine. Licensed under CC BY-SA 2.0 via Wikimedia Commons
“Motivation crowding” at a day-care centre
Source: Gneezy & Rustichini, A Fine Is A Price, Journal of Legal Studies, 2000
for Test group
Classical economic theory suggests that incentives should
increase desired behaviours. However, when fines were
introduced for late arrival at these day care centres, the number
of late arrivals doubled, as timeliness had previously been based
on social norms rather than financial incentives.
Keeping top of mind
Emotions build price elasticity
Rational Only Rational &
Source: Advertising Effectiveness: The Long & Short of It. IPA UK 1012
Only emotional salience can reduce price elasticity.
Rational advertising focusing on features and
benefits cannot do the same.
Strong branding drives brand value far
more than strong advertising
Source: Advertisingx Branding = Growth by The Partners, Lambie-Nairn & Millward Brown, 2015
10 year growth
Salient brand associations have more effect
on long-term value than good advertising.
I’m the boss
How much is a mug worth?
GROUP Price offered
Sellers Rp. 72,000
Choosers Rp. 31,200
Buyers Rp. 28,700
Sellers already have a mug and set a price for selling
Choosers have the option of a mug or money offer
Buyers have to make an offer to a Seller for a mug
Source: Daniel Kahneman, Thinking, Fast And Slow, 2011, pp295-296
Loss aversion predicts that once we own
something, it has greater value for us.
Expectations shape experience
Discounted energy drinks reduce performance
(expectations shape experience more than reality)
Low Expectancy-Strength High Expectancy-Strength
Discounted price Full price
Source: Shiv, Carmon & Ariely, Placebo effects of marketing actions: Consumers may get what they pay for, J Consumer Research, 2005
Which is the best price?
Source: The influence of print advertisement organization on odd-ending price image effects, Keith Coulter in Journal of Product & Brand Management, 2002
We correlate numbers with physical experience, so numbers on the
right and top are perceived as “larger” than those on the left and
bottom (in most cultures). Bigger fonts are also perceived as
Pricing in a SNAPP
Weaving richer connections
between people and brands