DeepSummary
In this episode, Roger Dooley interviews Leigh Caldwell, a behavioral economist and pricing expert, about the psychology behind pricing strategies. They discuss how businesses often undervalue their offerings and how pricing should be about crafting positive customer experiences in a profitable way. Caldwell explains that cost should be the baseline, but the real focus should be on understanding the perceived value to customers and setting prices accordingly.
Caldwell shares insights on effective pricing tactics, such as price differentiation to cater to diverse customer segments, using mixed pricing strategies during inflation, and bundling complementary products. He also emphasizes the importance of storytelling and creating subjective value around products, introducing the concept of "system three" decisions based on imagination and experiences.
The conversation covers various examples and techniques, including how businesses like HEB, Trader Joe's, and Aldi use product combinations to grab attention and convey value. Caldwell debunks the notion of "manipulation" and encourages understanding consumer decision-making patterns to guide customers toward the right choices for them.
Key Episodes Takeaways
- Pricing should be about crafting positive customer experiences and guiding customers to make the right decisions for themselves, not just about setting numbers.
- Businesses often undervalue their offerings and should focus on understanding perceived customer value rather than just cost.
- Price differentiation and mixed pricing strategies can cater to diverse customer segments and convey value during times of inflation.
- Bundling complementary products can create a more holistic and valuable experience for customers.
- Storytelling and creating subjective value around products through imagination and experiences is crucial in pricing strategies.
- The concept of "system three" decisions expands on intuitive and conscious decision-making models by incorporating imagination and experience-based evaluations.
- Pricing should not be about manipulation but about understanding customer decision-making patterns and guiding them towards the right choices.
- The subjective perception of a product is a factor that affects not just pricing but also the genuine value it creates for customers.
Top Episodes Quotes
- “And I think the answer to that is absolutely, you don't want to be doing anything underhand, anything that is against your customers interest. But that doesn't mean that you shouldn't use psychology.“ by Leigh Caldwell
- “So psychology, when it's about shaping the experience to go with the grain of the customer's decision making. When it's about setting prices that show your customers where the value is in your products, that guide customers to make the right decision for them. Pricing can be a really good tool for that.“ by Leigh Caldwell
- “I think that the subjective perception of a product is equally one of those factors. And it affects not just the price that you can charge, but the genuine value that this product creates.“ by Leigh Caldwell
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Episode Information
Brainfluence
Roger Dooley
1/26/24
In this Brainfluence episode, we explore pricing psychology with Leigh Caldwell, a seasoned behavioral economist and pricing strategist. Leigh joins us to shed light on the true essence of pricing – it's more than just numbers; it's about crafting positive customer experiences in a profitable way. In our discussion, we delve into the relationship between cost and value, and how businesses often undervalue their offerings.
Leigh reveals effective ways to appeal to diverse customer segments through varied pricing strategies. We also dive into the psychology behind discounts and negotiations, examining the trade-offs customers make for a good deal. We also discuss supermarket strategies. We'll analyze how stores like HEB, Trader Joe's and Aldi use product combinations to catch consumer attention and convey value. Leigh introduces innovative concepts in behavioral economics, including "subjectivity as a factor of production" and the "system three approach," which expands on the conventional intuitive versus conscious decision-making models. We even discuss the curious concept of a "chocolate teapot" - a concept familiar in the U.K. but that might mystify our U.S. audience.
Show notes and resources: https://www.rogerdooley.com/leigh-caldwell-pricing/ The Psychology of Price: https://amzn.to/3Uivbt9 The Irrational Agency: https://irrationalagency.com/
Leigh Caldwell is a behavioral economist and pricing expert with 10+ years of experience in applying behavioural science commercially. He is the creator of the System 3 methodology, author of The Psychology of Price, and a frequent speaker at academic and industry conferences.