Notes on...
Robert CIALDINI
Price alone had become a trigger feature for quality; and a dramatic increase in price alone had led to a dramatic increase in sales among the quality-hungry buyers.
Chapter 1 • Weapons of Influence
Similar concept probably applies in behavioural finance. Stock prices can get driven up due to already high prices being perceived as an increase in quality. This is probably exacerbated by skilled traders anticipating and taking advantage such sentiment-driven buying – so-called momentum trading.
So, just as it is possible to make the same bucket of water appear to be hotter or colder, depending on the temperature of previously presented water, it is possible to make the price of the same item seem higher or lower, depending on the price of a previously presented item.
Chapter 1 • Weapons of Influence
Fascinating application of a simple algorithm to influence human behaviour. One wonders what kinds of more sophisticated algorithms could be applied as part of a sales strategy, to drive short-term sales (or various shapes of curve of sales, as desired, to match product demand).
The clearest utilization of this aspect of the larger-then-smaller-request sequence occurs in the retail-store sales practice of “talking the top of the line.” Here the prospect is invariably shown the deluxe model first. If the customer buys, there is frosting on the store’s cake. However, if the customer declines, the salesperson effectively counteroffers with a more reasonably priced model.
Chapter 2 • Reciprocation
This probably happens even in even larger supermarkets or retail outlets. Luxury version are shown prominently as the customer enters the store, then when you get deeper into the aisles, you have the cheaper items. But those items are also over-priced. But because you were already "primed" with the higher priced luxury goods, you accept the higher prices without questioning or searching further. If enough customers do this, somewhat blindly, then that higher price becomes the new "standard price" and thus you have "inflation" in consumer goods driven by the consumers' own behaviour!