Episode 203 - Price Psychology: 14 Techniques That Make Price A Non-Issue – Part 3

Reduce to the Ridiculousness (JND): This technique involves paring down your request to something that seems manageable, easier to comprehend or easier to monetize. Let's say you are trying to convince someone to purchase a life insurance policy. The client wants a $250,000 policy and you feel that is not high enough for his needs. To adequately take care of his family, you suggest a $500,000 policy. His perception is that the monthly payment for a $500,000 policy is too high. So you break it down for him, telling him that for an extra 50 cents a day, or the cost of a can of soda, he can insure himself and adequately take care of his family if something were to happen to him. With this contrast, your client can see that the extra 50 cents is worth it to have the extra $250,000 in coverage. You have reframed your request into simple terms to help your prospect see it fitting into his way of life. If you are getting resistance from coworkers to participate in a new project, you could say we are only looking for your help for 10 minutes a day or 45 minutes a week.

 Many times, we can fly under the radar with the contrast principle. There is a theory called the "Just Noticeable Difference" (JND),  which means the minimum amount of difference in the intensity of the stimulus that can be detected. That means the minimal amount of change the brain can handle before it begins to notice.  What does this mean? How much can you raise the price of a product without anyone noticing? This is also true for taste. Companies want the best taste for the lowest cost. The quality of the ingredients causes people to notice or not notice the quality of the product.

 Many marketers would rather change the packaging and offer less of their product than resort to charging more. When we don't notice the difference, we think we are getting the same deal. Watching a sunset would be below the JND.  We really can’t see the sun move down the horizon as we watch it. When you raise the price of a product, you don’t want anyone to notice. Gas prices going up another ten cents is not noticed unless it breaks the dollar threshold i.e. $4.00-$5.00.  Is the yogurt cup now 2.9 ounces or 3 ounces?  We don’t notice especially since the cup size has not changed, but the bottom of the cup is more concave.   

3 Negotiation Techniques from Harvard Business Review

 

REVISED OFFER