How to price anything: The psychology of why we’ll pay what we pay(crew.co)
crew.co
How to price anything: The psychology of why we’ll pay what we pay
https://crew.co/backstage/blog/the-psychology-of-pricing
20 comments
The labor theory of value is fundamentally misguided and will lead to a misallocation of resources. Market signals allow people to coordinate their activities. If housing is getting more expensive it means that it will be more profitable for me to build houses instead of something else, then I'll do it. Eventually housing will get cheaper and I'll move on to the next thing.
> The "trap" that is the Labor Theory of Value may not be the most profitable but maybe it's the most ethical
The labour theory of value doesn't even logically hang together in any way, when you think about it.
Okay, let's suppose I spend a whole week making a giant sculpture of a dog turd out of macaroni and glitter (suppose also that I've done a terrible job even within those parameters). What is the value of that dog turd? According to the labour theory of value, it's worth quite a lot... but nobody is actually going to be willing to exchange anything else of value for it. So in what sense does it have value?
The labour theory of value doesn't even logically hang together in any way, when you think about it.
Okay, let's suppose I spend a whole week making a giant sculpture of a dog turd out of macaroni and glitter (suppose also that I've done a terrible job even within those parameters). What is the value of that dog turd? According to the labour theory of value, it's worth quite a lot... but nobody is actually going to be willing to exchange anything else of value for it. So in what sense does it have value?
Could get traction on Kickstarter with a good video.
Stranger things have happened. Some guy got $55,000 to make a potato salad: https://www.kickstarter.com/projects/zackdangerbrown/potato-...
Yes, amount of Labor doesn't always determine value. But this article isn't really about value, is it? It's about pricing.
>But this article isn't really about value, is it? It's about pricing.
Perhaps he's responding to _you_ and your comment instead of the article? You wrote:
>the Labor Theory of Value may not be the most profitable but maybe it's the most ethical, both compensating the workers fairly and not ripping off the consumer.>
You had connected "value" to the "pricing" ... but if tallying labor-hours to measure value is flawed (which you agreed with), what clarity is made by using "labor-hours" to justify "ethical pricing"? Isn't it better to ignore LTOV if it makes us less knowledgable on what we charge others and what we are willing to pay?
Perhaps he's responding to _you_ and your comment instead of the article? You wrote:
>the Labor Theory of Value may not be the most profitable but maybe it's the most ethical, both compensating the workers fairly and not ripping off the consumer.>
You had connected "value" to the "pricing" ... but if tallying labor-hours to measure value is flawed (which you agreed with), what clarity is made by using "labor-hours" to justify "ethical pricing"? Isn't it better to ignore LTOV if it makes us less knowledgable on what we charge others and what we are willing to pay?
Relevant: https://en.wikipedia.org/wiki/Transformation_problem
I assume the only objective way to calculate value would be to see the planet as a dynamic system, put a baseline price on energy and do some kind of thermodynamic accounting of every transformation process in the chain, basically energy expense bookkeeping. I'm aware there's some theories about this, but I never looked into any of it.
I assume the only objective way to calculate value would be to see the planet as a dynamic system, put a baseline price on energy and do some kind of thermodynamic accounting of every transformation process in the chain, basically energy expense bookkeeping. I'm aware there's some theories about this, but I never looked into any of it.
Which still has nothing to do with value, which is why I value more highly a Stradivarius violin than the pile of ashes which you could obtain by burning a Stradivarius violin.
It's you.
Your last question is loaded; it assumes maximizing profit is bad. In practice high profit margins are often a reward for being first to market. Maybe those high margins are a recompense for R&D costs. Plenty of answers to rebuke your suggestion that maximizing profits is unethical. It's also a situational topic made more nuanced by the specific product, company and many other circumstances.
Your last question is loaded; it assumes maximizing profit is bad. In practice high profit margins are often a reward for being first to market. Maybe those high margins are a recompense for R&D costs. Plenty of answers to rebuke your suggestion that maximizing profits is unethical. It's also a situational topic made more nuanced by the specific product, company and many other circumstances.
This article says nothing about compensation for heavy R&D costs. It doesn't concern itself with develpment and production costs at all. It is just describing ways in which consumers can be manipulated into spending the highest amount of money possible.
There's no need to fit the post into a larger narrative; it is what it is. Seems more like you may be projecting your psychology or fears onto the article. It's just a list of pricing psychology tricks. And it cuts both ways you know; readers learn how pricing strategies may affect their buying decisions.
The article is not advocating for the "manipulation" of anyone. It's up to the reader to implement, ignore or consider. If the title and some words were rephrased it could be an article on how to spot pricing tricks; the content would mostly be the same.
The article is not advocating for the "manipulation" of anyone. It's up to the reader to implement, ignore or consider. If the title and some words were rephrased it could be an article on how to spot pricing tricks; the content would mostly be the same.
Your response is loaded as well: you describe maximizing profits, but you don't describe the scenario required for this to be a good heuristic: a functioning market made up of primarily rational consumers who choose the best product based on its merits and cost.
But we have found that spending money on trained psychologists (or schemes developed by them) who abuse natural human tenancies to trick consumers into irrationally spending money or more money on your products is very effective at maximizing profits. But it simultaneously removes the condition that's required to make maximizing profits a good thing.
Fraud is also very profitable.
But we have found that spending money on trained psychologists (or schemes developed by them) who abuse natural human tenancies to trick consumers into irrationally spending money or more money on your products is very effective at maximizing profits. But it simultaneously removes the condition that's required to make maximizing profits a good thing.
Fraud is also very profitable.
> Your last question is loaded; it assumes maximizing profit is bad.
I tried to ethically and fairly provide my professional services. Clients ended up going to the shady, incompetent and dangerous providers because they used scare tactics and charged 3x more than me. The clients thought this high price meant they were higher quality.
Not all, but some. I stuck with my fair pricing because I believe it's the right thing to do and it pays off long term. But these psychological factors definitely matter.
Not all, but some. I stuck with my fair pricing because I believe it's the right thing to do and it pays off long term. But these psychological factors definitely matter.
It's not the right thing and doesn't pay long term. Charge three times as much, don't use scare tactics if it's not something you should do, discover that you have more clients paying 3 times as much. And now they're using you and not some scammer.
I found another site with a "more substantial" list of these strategies and noticed a few "similarities" [0] (e.g. Google " The saliency of the payment (e.g., we feel more pain if we see money leaving our hands)" and look for results.)
It appears crew.co scraped content without citation to market their webdev services.
[0] http://www.nickkolenda.com/psychological-pricing-strategies/
It appears crew.co scraped content without citation to market their webdev services.
[0] http://www.nickkolenda.com/psychological-pricing-strategies/
This is a pretty serious accusation, so I did have a quick look.
I don't see any grounds for your statement that they scraped the content.
In fact, both the OP and your linked article clearly cite the exact same paper that they both took your referenced content from.
I don't see any grounds for your statement that they scraped the content.
In fact, both the OP and your linked article clearly cite the exact same paper that they both took your referenced content from.
I don't see any grounds for your statement that they scraped
the content.
In fact, both the OP and your linked article clearly cite the
exact same paper that they both took your referenced content
from.
[0]https://www.google.com/search?hl=en&safe=off&output=search&s...
> Even crazier, the physical size of your font can influence peoples’ understanding and feelings about it.
Now, I wonder if I can make this work the other way around. If I'm making an offer on something, I wonder if it's more likely to be accepted if I write it in giant numerals.
I don't think the many-syllables thing is likely to work, though, if I offer some crazy non-round number then my bargaining partner is likely to just come straight back with "How about we round it up to...?" -- though I suppose that could be useful if even the rounded-up number is a nice low one.
Now, I wonder if I can make this work the other way around. If I'm making an offer on something, I wonder if it's more likely to be accepted if I write it in giant numerals.
I don't think the many-syllables thing is likely to work, though, if I offer some crazy non-round number then my bargaining partner is likely to just come straight back with "How about we round it up to...?" -- though I suppose that could be useful if even the rounded-up number is a nice low one.
The "trap" that is the Labor Theory of Value may not be the most profitable but maybe it's the most ethical, both compensating the workers fairly and not ripping off the consumer. But why try to have ethical buisness practices when you could just exploit people's base instincts to maximize your profits?