Written by Dr. Dan Ariely, MIT Professor and Author of Predictably Irrational – One of the juiciest books on Behavioural Economics out!
Marketing Tip – The Truth AboutÂ Relativity (Predictably Irrational by Dan Ariely)
Excerpted from Predictably Irrational, Chapter 1:
One day while browsing the World Wide Web (obviously for work-not just wasting time), I stumbled on the following ad, on the Web site of a magazine, theÂ Economist.
I read these offers one at a time. The first offer-the Internet subscription for $59 seemed reasonable. The second option-the $125 print subscription-seemed a bit expensive, but still reasonable.
But then I read the third option: a printÂ andÂ Internet subscription for $125. I read it twice before my eye ran back to the previous options. Who would want to buy the print option alone, I wondered, when both the Internet and the print subscriptions were offered for the same price? Now, the print- only option may have been a typographical error, but I suspect that the clever people at theEconomistâ€˜s London offices (and they are clever-and quite mischievous in a British sort of way) were actually manipulating me. I am pretty certain that they wanted me to skip the Internet- only option (which they assumed would be my choice, since I was reading the advertisement on the Web) and jump to the more expensive option: Internet and print.
But how could they manipulate me? I suspect itâ€™s because the Economistâ€˜s marketing wizards (and I could just picture them in their school ties and blazers) knew something important about human behaviour: humans rarely choose things in absolute terms. We donâ€™t have an internal value meter that tells us how much things are worth. Rather, we focus on the relative advantage of one thing over another, and estimate value accordingly. (For instance, we donâ€™t know how much a six- cylinder car is worth, but we can assume itâ€™s more expensive than the four- cylinder model.)
In the case of theÂ Economist, I may not have known whether the Internet- only subscription at $59 was a better deal than the print- only option at $125. But I certainly knew that the print and-Internet option for $125 was better than the print- only option at $125. In fact, you could reasonably deduce that in the combination package, the Internet subscription is free! â€œItâ€™s a bloody steal-go for it, governor!â€ I could almost hear them shout from the riverbanks of the Thames. And I have to admit; if I had been inclined to subscribe I probably would have taken the package deal myself. (Later, when I tested the offer on a large number of participants, the vast majority preferred the Internet- and- print deal.)
So what was going on here? Let me start with a fundamental observation: most people donâ€™t know what they want unless they see it in context. We donâ€™t know what kind of racing bike we want-until we see a champ in the Tour de France ratcheting the gears on a particular model. We donâ€™t know what kind of speaker system we like-until we hear a set of speakers that sounds better than the previous one. We donâ€™t even know what we want to do with our lives-until we find a relative or a friend who is doing just what we think we should be doing. Everything is relative, and thatâ€™s the point. Like an airplane pi lot landing in the dark, we want runway lights on either side of us, guiding us to the place where we can touch down our wheels.
In the case of theÂ Economist, the decision between the Internet only and print- only options would take a bit of thinking. Thinking is difficult and sometimes unpleasant. So theÂ Economistâ€™s marketers offered us a no-brainer: relative to the print-only option, the print-and-Internet option looks clearly superior!