The Psychology of Pricing in a SNAPP
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The document discusses pricing psychology based on the SNAPP framework. It argues that pricing should be simplified by reducing options to increase sales. Social norms are more powerful motivators than financial incentives. Strong branding drives long-term brand value more than advertising. Personalizing prices based on reference points like ownership increases perceived value. Expectations shaped by numerical and visual patterns influence experiences more than objective reality. The optimal pricing approach uses the SNAPP factors of simplifying choice, leveraging social norms, prioritizing availability and branding, personalizing value, and priming expectations through patterns.
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The Psychology of Pricing in a SNAPP
- 1. Pricing in a SNAPP: ! The psychology of money! 11 June 2015
- 2. Divider slide Divider slide Price is not the same as value “Price is what you pay. Value is what you get.” Warren Buffe: Warren Buffett KU Visit" by Mark Hirschey - Work of Mark Hirschey. Licensed under CC BY-SA 2.0 via Wikimedia Commons
- 3. Rational calculation or intuitive heuristics?
- 4. SNAPP behaviour framework & card game SIMPLE NORMATIVE AVAILABLE PERSONAL PATTERNS
- 5. SIMPLE
- 6. The paradox of choice
- 7. Less is more - that means more sales! Procter & Gamble have found that fewer SKUs can mean more sales. In one case, reducing 24 detergent SKUs to 15 increased total sales by 10%.
- 8. Small differences can make a difference when direct comparisons are being made 46# 77# 0# 10# 20# 30# 40# 50# 60# 70# 80# 90# 2#Items,#Same#price# 2#Items,#Different#price# %"Comple)ng"a"purchase" Source: Kim, Novemsky & Dhar, Adding Small Differences Can Increase Similarity and Choice, Psychological Science, 2012
- 9. NORMATIVE
- 10. Follow the crowd
- 11. Divider slide Divider slide Intrinsic motivations are more powerful than extrinsic ones “Money is very o=en the most expensive way to mo@vate people. Social norms are not only cheaper, but o=en more effec@ve as well.” Dan Ariely, Predictably Irra.onal "Dan Ariely - PopTech 2010 - Camden, Maine" by PopTech - Flickr: Dan Ariely - PopTech 2010 - Camden, Maine. Licensed under CC BY-SA 2.0 via Wikimedia Commons
- 12. “Motivation crowding” at a day-care centre 0 5 10 15 20 25 Week1 Week2 Week3 Week4 Week5 Week6 Week7 Week8 Week9 Week10 Week11 Week12 Week13 Week14 Week15 Week16 Week17 Week18 Week19 Week20 CONTROL TEST Latearrivals Source: Gneezy & Rustichini, A Fine Is A Price, Journal of Legal Studies, 2000 Fine introduced for Test group Classical economic theory suggests that incentives should increase desired behaviours. However, when fines were introduced for late arrival at these day care centres, the number of late arrivals doubled, as timeliness had previously been based on social norms rather than financial incentives.
- 13. AVAILABLE
- 14. Keeping top of mind
- 15. Divider slide Emotions build price elasticity 0 1 2 3 4 5 6 7 8 Rational Only Rational & emotional Emotional Only Verylargereductionin priceelasticity(3+years) % 0% 5% 7% Source: Advertising Effectiveness: The Long & Short of It. IPA UK 1012 Only emotional salience can reduce price elasticity. Rational advertising focusing on features and benefits cannot do the same.
- 16. Divider slide Strong branding drives brand value far more than strong advertising Growthinbrandvaluefrom2005to2015(%) Source: Advertisingx Branding = Growth by The Partners, Lambie-Nairn & Millward Brown, 2015 0% 50% 100% 150% 200% Poor branding, poor advertising Poor branding, strong advertising Strong branding, poor advertising Strong branding, strong advertising 10 year growth 21% 27% 76% 168% Salient brand associations have more effect on long-term value than good advertising.
- 17. PERSONAL
- 18. I’m the boss
- 19. How much is a mug worth? GROUP Price offered Sellers Rp. 72,000 Choosers Rp. 31,200 Buyers Rp. 28,700 Sellers already have a mug and set a price for selling Choosers have the option of a mug or money offer Buyers have to make an offer to a Seller for a mug Source: Daniel Kahneman, Thinking, Fast And Slow, 2011, pp295-296 Loss aversion predicts that once we own something, it has greater value for us.
- 22. Divider slide Divider slide Discounted energy drinks reduce performance (expectations shape experience more than reality) 0 2 4 6 8 10 12 Low Expectancy-Strength High Expectancy-Strength Discounted price Full price Source: Shiv, Carmon & Ariely, Placebo effects of marketing actions: Consumers may get what they pay for, J Consumer Research, 2005 Numberofpuzzlescompleted
- 23. Which is the best price? Source: The influence of print advertisement organization on odd-ending price image effects, Keith Coulter in Journal of Product & Brand Management, 2002 $ 5 $ 5 $ 5 We correlate numbers with physical experience, so numbers on the right and top are perceived as “larger” than those on the left and bottom (in most cultures). Bigger fonts are also perceived as “larger” too.
- 24. Divider slide Divider slide Pricing in a SNAPP • Reduce op@ons to SIMPLIFY choice • Use social NORMS to incen@vize • Make your brand AVAILABLE • PERSONALISE to add value • Use PATTERNS to prime expecta@ons
- 26. Terima kasih! ! Weaving richer connections between people and brands www.tapestryworks.asia