Price Psychology: How to Create a Hook
It turns out that everything is relative.
This is how humans perceive the world. What is something big? It is because we compare it with something smaller. We don’t have an internal meter that tells us how big, tall or expensive things are. Instead, we focus on the differences between similar objects and emotions.
Do you want an example?
The two black circles in the middle are exactly the same size. But the one on the left probably seems bigger to you. Your mind cannot help but evaluate its size by comparing it with the smaller circles around it.
Another example:
- Imagine that you want to buy a photo frame. In the nearest store it costs 15 euros. But you know that in another store it is on sale and sells for 8 euros. Would you walk 15 minutes to the other store to save 7 euros? Most people do.
- But what would happen if you wanted to buy a car? Suppose that the nearest dealership gives you a price of 12,000 euros. And you know that in another one that is 15 minutes away the price is 11,993 euros. Would you walk 15 minutes to the other dealership to save 7 euros? I bet I’ll invite you to dinner or not.
What is really happening here? In both cases, 15 minutes of your time would save you 7 euros, no matter how you look at it. But in the second case you compare 7 euros with 12,000 , and it seems ridiculous to you.
How to create a price hook
We like to be able to compare. We determine everything based on the differences between things. Unconsciously our mind goes to the simple, looks for relationships between similar objects, compares what is easily comparable.
Prof. Ariely’s experiment
In an experiment conducted by Professor Ariely (of whom I am a devoted admirer), he offered 100 students two subscription options to an economics magazine:
- The first consisted of having access only to the online version of the portal for $59 a year.
- The second consisted of the online subscription plus the printed version for $125 annually.
Only 32% opted for the most expensive option , the online+print version.
Then he repeated the experiment again, adding a third possibility : a subscription only to a print version for $125 per year. No online access. The result was that 84% of the students chose the option that had previously been chosen by only 32% of the participants.
How is it possible?
Well, it is possible because the third possibility acted as a hook . For the same price, it only offered online access compared to the option that also included the printed version. The key is that they then became easily comparable alternatives .
Since we irrationally determine whether something is good or bad compared to something else, the online+print option for €125 became the good choice of the three.
The usefulness of bait prices
A hook, therefore, is simply to add an option that can be easily compared so that the other alternative seems much better and people decide on that one.
Its usefulness is well known in the shampoo market, for example.
- A company offers the same shampoo for sale but with 25% more quantity for the same price. The normal version and the offered version are found on the same supermarket shelf and as they can be compared, the one that offers more product seems better to you, even compared to all the other shampoo brands present. In this way their sales skyrocket. The normal version acts as a bait here.
I only have one doubt regarding Professor Ariely’s study. Participants were asked which one they would choose, assuming they were interested in purchasing a subscription. What is not contemplated is how many would not initially be interested in purchasing a subscription and in that case, what would be the option that would really convince them.
What I believe is that if we were not clear that we wanted to subscribe to that magazine, perhaps we would initially opt for the cheapest option . Since the results of the experiment are expressed as a percentage and not in absolute terms, we cannot know.