Psychology of Sales

Retail­ers aren’t in sales; they’re “in the per­cep­tion busi­ness”, says Jonah Lehr­er while dis­cuss­ing how we per­ceive goods of vary­ing prices, espe­cially dis­coun­ted goods.

Con­sumers typ­ic­ally suf­fer from a ver­sion of the placebo effect. Since we expect cheap­er goods to be less effect­ive, they gen­er­ally are less effect­ive, even if they are identic­al to more expens­ive products. This is why brand-name aspir­in works bet­ter than gen­er­ic aspir­in, or why Coke tastes bet­ter than cheap­er colas, even if most con­sumers can­’t tell the dif­fer­ence in blind taste tests. “We have these gen­er­al beliefs about the world⎯for example, that cheap­er products are of lower quality⎯and they trans­late into spe­cif­ic expect­a­tions about spe­cif­ic products,” said [Baba Shiv, a neur­oe­conom­ist at Stan­ford]. “Then, once these expect­a­tions are activ­ated, they start to really impact our beha­vi­or.”

I sup­pose this goes some way to explain­ing why some magazines are gain­ing read­ers des­pite increas­ing their sub­scrip­tion rates (The Eco­nom­ist, for example).

The lat­ter via Kot­tke