I recently read Predictably Irrational.
This is a companion discussion topic for the original blog entry at: http://www.codinghorror.com/blog/2009/09/9-ways-marketing-weasels-will-try-to-manipulate-you.html
I recently read Predictably Irrational.
Wow, this is your top entry this year so far imho. I’m going to keep a bookmark to this this page forever.
"When a truffle was $0.15 and a kiss was $0.01, 73% of subjects chose the truffle and 27% the Kiss. But when a truffle was $0.14 and a kiss was free, 69% chose the kiss and 31% the truffle.
According to standard economic theory, the price reduction shouldn’t have lead to any behavior change, but it did."
Then standard economic theory is stupid. You’re thinking of buying an ipod. Do you want the ipod touch or the ipod nano? The ipod touch is 300 and the nano is 100. (Making this up). $200 difference. Which do you choose? Now I tell you you can have a nano for free for an ipod touch for $200. Now which do you choose. Of COURSE you are going to choose what’s free. You get something for nothing. Doesn’t seem irrational at all to me.
Replying to myself: “You will tend to overestimate the value of items you get for free. Try to resist this by viewing free stuff skeptically rather than welcoming it with open arms. If it was really that great, why would it be free?”
Of course, this does not apply to the free health care we’ll all be getting soon. That’s perfect.
Great post Jeff.
Now reworking pricing table to include the platinum edition, plz don’t tell anyone else about this.
i think your numbering is screwed
If you are definitely buying an ipod (in your example), then you might as well already be out the $100 for the nano. The only question is whether you are willing to pay $200 to “trade” your nano for an ipod. That’s why “theory” (actually, a deliberately simplified model) predicts you would only care about the price difference.
But this is assuming the prices you are offered are market prices! If someone offers you a free ipod nano, you know you are receiving something with a market price above zero. You could turn around after the offer ends and sell the ipod nano on ebay. You are not as sure that the ipod touch is really worth more than $200 as that the nano is worth more than zero. So you are right that it can be rational to reverse your decision, given that you participate in a market where you can buy and sell as well as consume.
I have similar concerns about whether other “irrationalities” mentioned here (and in similar discussions of behavioral economics) are really either rational reactions to concerns outside the frame of reference of the experimenters, or are non-selfish behaviors that have positive effects in a group. As a (possible) example of the latter, consider the “relative discount” example (people will drive 15 minutes to save $7 on a pen, but not on a suit). This could be explained as a desire to punish high relative markups. In a world where people did not have this behavior, cheap items would frequently be sold at very high relative prices, and the aggregate cost (of paying or avoiding these prices) would be high. In the world where people will make an irrational effort to avoid high relative prices, such prices are rare and the effort to avoid them is not necessary.
“Irrational” behavior FTW.
I haven’t read “Predictably Irrational,” but it sounds a lot like “Influence” by Robert Cialdini, which was first published in the late 1970’s (I can’t find the exact date of the first publication, but I think it was 1976). These are really interesting ideas, and it’s nice to see them in a book accessible to the general public. But, while some of these studies are relatively new, the general principles have been around for a while.
For a second there, I thought I wasn’t reading Coding Horror.
When you are an undergrad your choices are basically ramen or cheap ramen, I go for cheap ramen. This clearly book don’t apply to me.
When you are a teenager without a credit card to buy things online, there are two options for software or music or movies: free, or piracy.
Defiantly a good read, thanks!
I’m surprised this slipped past both the book’s authors and you about the free legal aid item: pro bono. Lawyers aren’t required to provide some of their time for such uncompensated services, but it is enocouraged by the various bar associations. So to the lawyer, doing that work for $30 means taking a big pay cut (and, rememebr these are lawyers, so the thought that it’s setting a precendent must loom large, too); doing it for free, at least as long as it’s not too great an amount of work per lawyer per year, gets them the pro bono practice to make them look good to their peers. It’s not hard at all, at all, to see why they preferred to donate their time for free.
Even Wikipedia knows about pro bono…
#3 Reminds me of LINUX.
Interesting stuff, but as far as the last point with the painkillers goes:
If the placebo effect works, is that necessarily bad?
If the users genuinely think that they are feeling better, maybe it is worth the extra “wasted” money.
Come to think of it, this might explain why mac users are so fanatical… it cost more, it must be better!
@TM, thank you so much, I’ve been saying this for years. We actually have to use macs in one of my classes, and while trying very hard to like the thing and get used to it so I can properly study the OS, I so far see nothing that makes it any better or worse than a PC. Safari actually regularly crashes when playing Youtube videos in HQ, among other things.
The difference of course is Apple’s closed-source attitude and higher prices. By closing the system and raising the price (and advertising on the merit of design) they create the illusion that their product is somehow more valuable than another equivalent piece of hardware with the exact same specifications.
This isn’t me harping on Mac, I don’t think they’re bad, I just don’t think they’re all that great either. My point is, this line of thinking applies to marketing everywhere, and it’s something I’ve been closely watching for years. I’m glad to hear I’m not the only one who approaches most marketing with skepticism.
(sorry, didn’t mean to make this two comments)
@void: Damn. Just… damn. That’s an excellent way to interpret an interpretation of an interpretation of a theory. I mean… wow. And the best part is, you made a good point.
I can buy the book from your links, pay $18.47 and you get a kickback or I can but it from B&N with my membership, pay $20.15 and have same day delivery in Manhattan.
I can feel like I helped out someone who gives me something to read for free every day and get a book for less by buying it through Amazon, but I won’t know if I was manipulated by the marketers until I read the book.
Maybe I should just see if someone I know has a copy and read that one?
Watch out for weasly marketers selling booksthat tell you how stupid people are so you can realize how smart you will be.
@Chris: You should really bother to read the book, research the author, or read his previous publications before making judgments like that. The author is a professor of behavioral economics at MIT, so educating people is kind of his “thing”.