Monday, September 14, 2009


Jeff Atwood builds on the book Predictably Irrational in order to try and offers 9 ways to help prevent marketers from taking advantage of you, e.g.:

1. Encourage false comparisons

When Williams-Sonoma introduced bread machines, sales were slow. When they added a "deluxe" version that was 50% more expensive, they started flying off the shelves; the first bread machine now appeared to be a bargain

When contemplating the purchase of a $25 pen, the majority of subjects would drive to another store 15 minutes away to save $7. When contemplating the purchase of a $455 suit, the majority of subjects would not drive to another store 15 minutes away to save $7. The amount saved and time involved are the same, but people make very different choices. Watch out for relative thinking; it comes naturally to all of us.

  • Realize that some premium options exist as decoys -- that is, they are there only to make the less expensive options look more appealing, because they're easy to compare. Don't make binding decisions solely based on how easy it is to compare two side-by-side options from the same vendor. Try comparing all the alternatives, even those from other vendors.
  • Don't be swayed by relative percentages for small dollar amounts. Yes, you saved 25%, but how much effort and time did you expend on that seven bucks?

This kind of irrationality probably has a big effect on a person's spending on social/environmental causes.

If i'm in the supermarket deciding on organic or non-organic bananas for 25 cents less, my instinct is to save money and buy non-organic, even though the difference is tiny compared to my total food budget.
I think this is very interesting. I wonder how many companies actually offer a more expensive option just to raise the sales on their cheaper items. Also I wonder if this is a cost efficient strategy. I remember something that you mentioned in class about there being a few options of buying the Economist magazine and how adding another option that was more expensive caused there to be a change in the sales. This idea just boggles me. Truely interesting.
I am terribly irrational in this way. In fact, this sort of stuff may be the most important thing for me to read in order to spur my intellectual development.
Economists must go a bit crazy--either crazy crazy in the case of academics, or joyous crazy in the case of entrepreneurs--over this kind of thing.
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