“We don’t see things as they are. We see them as we are” – Anais Nin
A study by Stanford and Caltech found that increasing the perceived price of a bottle of wine increased the ‘actual’ and perceived enjoyment that tasters derived from drinking the wine: According to researchers at the Stanford Graduate School of Business and the California Institute of Technology, if a person is told he or she is tasting two different wines—and that one costs $5 and the other $45 when they are, in fact, the same wine—the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage…
The researchers recruited 11 male Caltech graduate students who said they liked and occasionally drank red wine. The subjects were told that they would be trying five different Cabernet Sauvignon wines, identified by price, to study the flavor. But in fact, only three wines were used—two were given twice. The first wine was identified by its real bottle price of $5 and by a fake $45 price tag. The second wine was marked with its actual $90 price and by a fictitious $10 tag. The third wine, which was used to distract the participants, was marked with its correct $35 price.
A tasteless water was also given in between wine samples to rinse the subjects’ mouths. The wines were given in random order, and the students were asked to focus on flavor and how much they enjoyed each sample. In the study, the participants said they could actually taste five different wines, even though there were only three, and added that the wines identified as more expensive tasted better. The researchers found that with an increase in the perceived price of a wine that it lead to increased activity in the mOFC (medial OrbitoFrontal Corte) of the brain, which was due to an associated increase in taste expectation.
The ability of “framing” to impact perceived value is consistent with the signalling function of digital virtual goods… basic point of the study is that there are physiological reasons for peoples perceptions (e.g., high price can be perceived as higher value, whether it true or not)…
“What is madness? To have erroneous perceptions and to reason correctly from them.” – Voltaire
Part of our job as sales professionals revolves around our ability to understand how customers think. The more we can understand the way customers perceive value, the better we can position our solutions to help them derive the value that they seek. It is important for us to remember that… customers don’t choose one vendor over another accidentally; they choose for specific reasons that they value. Like an investigative reporter, or a detective trying to solve a complex mystery, we (as salespeople) endeavor to understand what causes customers to see the world the way they do.
The better we can understand the way customers think the more influence we can have on what they think about. Customers see the world through their perception and the way they interpret value (e.g., higher price could mean higher value). This creates a perception of the world and everything in it that customers accept as reality. Their perception seems to be the truth to them, and in fact, it is the truth to them. But what we think is truth, and what they (customers) think is truth could be two different realities.
Therefore, when an enterprise enters the marketplace; its business, people, and solutions have unique characteristics (differentiation) that distinguish them from other competitors. But every customer or decision-maker who might be asked to evaluate your enterprise; its business, people, and solutions could see a completely different picture, filtered by his or her own perception…it’s critical that both perceptions (customers & enterprise) are completely aligned with each other or the enterprise will not survive…
“Often we color perception with other people’s pencils” – Tim Winter
In an article by Steven Bradley he writes: “Why do people buy your products? Why do they purchase any product or service? One thing is for certain, it’s not about the price. It’s a common fallacy that people buy based on price alone. Well some do, but most people buy based on value or rather their perception of value. Many small business owners begin their business life with the thought that they will enter their market and simply offer what they have at a slightly lower price, and all will be good. In truth it’s not the best or even a good idea, instead you should compete on value.
Everything about your enterprise should be about increasing the perceived value of your products and services in the eyes of your potential customers”. People don’t buy on price. They buy on value or more correctly their perceived value in a product of service. People buy brand name foods in the supermarket, because they believe the brand is better in some way and offers a better value. Two people can argue over which of the exact same television set is the better bargain because each perceives the set they are buying offers a better value.
There will always be some other business that can charge less than you can. A better option is to charge what you will and offer more value for that price. Give customers the perception that your products and services are a better value than the competition, and you have a good chance of selling to them. Then, back that up with real value to sustain that perception, and you’ll create loyal customers who buy again, and again….
“It is one of the commonest of mistakes to consider that the limit of our power of perception is also the limit of all there is to perceive” – C.W. Leadbeater
In the article “More Expensive Placebos Bring More Relief” by Benedict Carey writes: In marketing, as in medicine, perception can be everything. A higher price can create the impression of higher value, just as placebo pill can reduce pain. Now researchers have combined the two effects. A $2.50 placebo, they have found, works better than one that costs 10 cents. The finding may explain the popularity of some high-cost drugs over cheaper alternatives, the authors conclude. It may also help account for patients’ reports that generic drugs are less effective than brand-name ones, though their active ingredients are identical.
The research was published in The Journal of the American Medical Association. The investigators had 82 men and women rate the pain caused by electric shocks applied to their wrist, before and after taking a pill. Half the participants had read that the pill, described as a newly approved prescription pain reliever, was regularly priced at $2.50 per dose.
The other half read that it had been discounted to 10 cents. In fact, both were dummy pills. The pills had a strong placebo effect in both groups. But 85 percent of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills. The investigators corrected for each person’s individual level of pain tolerance.
“It’s a great finding,” said Guy H. Montgomery, an associate professor of cancer prevention at the Mount Sinai School of Medicine who was not involved in the research. “Their manipulation of price affected expectancies of drug benefit, and pain is the ultimate mind-body phenomenon.” Previous studies have shown that pill size and color also affect people’s perceptions of effectiveness. In one, people rated black and red capsules as “strongest” and white ones as “weakest.”
Other information like the country where the drugs were manufactured can also affect perceptions. “It’s all about expectations,” said the lead researcher, Dan Ariely, a behavioral economist at Duke and the author of a new book, “Predictably Irrational: The Hidden Forces That Shape Our Decisions” (HarperCollins). His co-authors on the report were Rebecca Waber, Baba Shiv and Ziv Carmon. “When you’re expecting pain relief, you’re secreting your own opioids,” Dr. Ariely added. “And when you get it on discount, you doubt it, and your body doesn’t react as well.
“Don’t try to give your customers the best price; give them the best customer value for the price.” – “But only as the customer perceives value & price; not as you perceive value & price.”