From here:
The above passage was written by Duke University Professor Dan Ariel, who authored a book titled Predictably Irrational a few years ago. In it, he describes a phenomenon he calls "arbitrary coherence."
You're probably familiar with it in the context of price anchoring. To wit, once a price has been established in a prospective customer's mind, he or she is inclined to compare other prices for the same good or service to it.
If you're a professional logo designer (charging pro rates), that's why it's tough to convert folks accustomed to buying logos on fiverr. Likewise, if you're a professional copywriter, that's the reason it's tough to lock down folks accustomed to paying $50 per landing page.
It's not that such folks are "cheap" (though that may indeed be the case). It's that you're confronting the issue of arbitrary coherence. They've anchored your product or service to a low price.
The challenge is overcoming that anchor.
The excerpt linked above doesn't explain how to prevail over arbitrary coherence. But it's worth figuring out how to do so. Whether you're a logo designer, copywriter or retailer, beating the anchor set in the client/customer's mind means charging more for whatever you're selling.
More revenue.
Here are a few thoughts (I haven't read Ariely's book, which probably covers this ground).
First, brand obviously plays a role. We need look no further than Apple products to see this in action.
Second, the customer experience matters. There's a restaurant in my city that charges much higher prices for a steak than its competitors. But it's hard to beat the ambiance.
Third, differentiation is crucial. When you visit Starbucks, you don't order a "large" coffee. You order a "Venti" coffee. It's basically the same thing, but that difference helps Starbucks overcome the price set in the minds of its customers for a cup of joe. Few Starbucks customers are coffee aficionados. They can't tell the difference between Blue Mountain and Costa Rica. Yet they're willing to pay twice as much as they'd pay at 7-11, Circle K, or their local donut shop.
So, arbitrary coherence. All of us deal with it from a seller's point of view. But that's no reason to compete on price or rate. In fact, competing on those terms is a race to the bottom.
A better option is to figure out how to overcome the price anchor established in the client/customer's mind. Do that and you'll generate more revenue. Moreover, you'll do so in less time and at a lower conversion rate.
You might be wondering why I'm posting this. I've just been thinking about it lately in the context of my own businesses. Testing is obviously the path to higher conversions. But understanding customer psychology is just as important.
If you have anything to add, definitely do so. I know a lot of you are better at this stuff than myself.
If you're reading this and thinking "This is a waste of my time," perhaps this will make up for it...
The above passage was written by Duke University Professor Dan Ariel, who authored a book titled Predictably Irrational a few years ago. In it, he describes a phenomenon he calls "arbitrary coherence."
You're probably familiar with it in the context of price anchoring. To wit, once a price has been established in a prospective customer's mind, he or she is inclined to compare other prices for the same good or service to it.
If you're a professional logo designer (charging pro rates), that's why it's tough to convert folks accustomed to buying logos on fiverr. Likewise, if you're a professional copywriter, that's the reason it's tough to lock down folks accustomed to paying $50 per landing page.
It's not that such folks are "cheap" (though that may indeed be the case). It's that you're confronting the issue of arbitrary coherence. They've anchored your product or service to a low price.
The challenge is overcoming that anchor.
The excerpt linked above doesn't explain how to prevail over arbitrary coherence. But it's worth figuring out how to do so. Whether you're a logo designer, copywriter or retailer, beating the anchor set in the client/customer's mind means charging more for whatever you're selling.
More revenue.
Here are a few thoughts (I haven't read Ariely's book, which probably covers this ground).
First, brand obviously plays a role. We need look no further than Apple products to see this in action.
Second, the customer experience matters. There's a restaurant in my city that charges much higher prices for a steak than its competitors. But it's hard to beat the ambiance.
Third, differentiation is crucial. When you visit Starbucks, you don't order a "large" coffee. You order a "Venti" coffee. It's basically the same thing, but that difference helps Starbucks overcome the price set in the minds of its customers for a cup of joe. Few Starbucks customers are coffee aficionados. They can't tell the difference between Blue Mountain and Costa Rica. Yet they're willing to pay twice as much as they'd pay at 7-11, Circle K, or their local donut shop.
So, arbitrary coherence. All of us deal with it from a seller's point of view. But that's no reason to compete on price or rate. In fact, competing on those terms is a race to the bottom.
A better option is to figure out how to overcome the price anchor established in the client/customer's mind. Do that and you'll generate more revenue. Moreover, you'll do so in less time and at a lower conversion rate.
You might be wondering why I'm posting this. I've just been thinking about it lately in the context of my own businesses. Testing is obviously the path to higher conversions. But understanding customer psychology is just as important.
If you have anything to add, definitely do so. I know a lot of you are better at this stuff than myself.
If you're reading this and thinking "This is a waste of my time," perhaps this will make up for it...
