1. Selling the Un-Sellable Painting
Who would buy such an exquisite yet expensive painting?
A gallery owner is in a quandary. He has one painting that is un-sellable. No one has bought it since past 3 months that it has been on the wall. People appreciate the painting. They praise its vibrant use of colors and strokes. But when they hear its price they shrink away.
People advice the gallery owner to reduce the price of that painting. But the gallery owner doesn’t budge. Instead, he commissions another painter to create a new painting with the same style and colors – but to make that painting on a much bigger canvas.
When the big new painting is completed, the gallery owner showcases it right next to the original un-sellable painting. And values it at almost double the price of the original painting.
Do you know what happens next? The original painting that didn’t sell for 3 whole months is now sold within a day.
People don’t make buying decisions in a vacuum. They compare it with other available alternatives. In this case, they would now gush over the big new painting. But hearing its price, they would balk. Then they would see a smaller painting with similar style and buy that without a further thought.
2. African Anchoring Confusion
Amos Tversky and Daniel Kahneman are two psychologists who conduct a classic experiment.
They ask a group of people: Is the number of African countries in the United Nations greater or less than 10%?
Most people say that 10% is too low. Maybe its somewhere near 25%.
The 2 psychologists than ask another group of people: Is the number of African countries in the United Nations greater or less than 65%?
This time, most people said that 65% is too high. Maybe the correct answer is 45%!
Peoples answer changes based on the first number they are given!
3. Economist Changes the Anchor to Persuade People
Economist magazine gives the following pricing options to people who want to subscribe:
- Website-only subscription: $59.00 per year.
- Print-only subscription: $125.00 per year.
- Print & web: $125.00 per year.
Dan Ariely, a behavioral economist himself is confused: why would the Economist offer the same price for print-only subscription as well as for print & web subscription? It didn’t make sense to him.
So Dan started investigating and found out why Economist gave the 2nd print-only option that they knew no one would go for.
He gathered 2 groups of 100 students each and asked them to subscribe to the Economist. To the first group, he made the same offer that the Economist makes. And the results of what people chose are:
- Website-only subscription: 16
- Print-only subscription: 0
- Print & web: 84
For the 2nd group, Dan removes the 2nd print-only pricing option. The results this time are:
- Website-only subscription: 68
- Print & web: 32
Economist gives the 2nd pricing option that they know no one will buy because it increases the number of sales their higher priced 3rd option gets!
- People don’t make decisions in a vacuum. They make them by comparing various factors with each other.
- People pick an anchor and base their final conclusion near and in comparison to that anchor. So make sure that the answer you want is close to the anchor point.
- To persuade people, change their frame of mind by giving them a different anchor point. And they’ll decide in your favour.