Pricing in a SNAPP: !
The psychology of money!
11 June 2015
Divider slide
Divider slide
Price is not the same as value
“Price
 is
 what
 you
 pay.
 
 
Value
 is
 what...
Rational calculation or intuitive heuristics?
SNAPP behaviour framework & card game
SIMPLE
NORMATIVE
AVAILABLE
PERSONAL
PATTERNS
SIMPLE
The paradox of choice
Less is more - that means more sales!
Procter & Gamble have found that fewer SKUs can
mean more sales. In one case, reduci...
Small differences can make a difference when
direct comparisons are being made
46#
77#
0#
10#
20#
30#
40#
50#
60#
70#
80#
...
NORMATIVE
Follow the crowd
Divider slide
Divider slide
Intrinsic motivations are more powerful
than extrinsic ones
“Money
 is
 very
 o=en
 th...
“Motivation crowding” at a day-care centre
0
5
10
15
20
25
Week1
Week2
Week3
Week4
Week5
Week6
Week7
Week8
Week9
Week10
We...
AVAILABLE
Keeping top of mind
Divider slide
Emotions build price elasticity
0
1
2
3
4
5
6
7
8
Rational Only Rational &
emotional
Emotional Only
Verylar...
Divider slide
Strong branding drives brand value far
more than strong advertising
Growthinbrandvaluefrom2005to2015(%)
Sour...
PERSONAL
I’m the boss
How much is a mug worth?
GROUP Price offered
Sellers Rp. 72,000
Choosers Rp. 31,200
Buyers Rp. 28,700
Sellers already have...
Divider slide
PATTERNS
Expectations shape experience
Divider slide
Divider slide
Discounted energy drinks reduce performance
(expectations shape experience more than reality)
...
Which is the best price?
Source: The influence of print advertisement organization on odd-ending price image effects, Keit...
Divider slide
Divider slide
Pricing in a SNAPP
•  Reduce
 op@ons
 to
 SIMPLIFY
 choice
 
•  Use
 social
 NOR...
Terima kasih
SIMPLE
NORMATIVE
AVAILABLE
PERSONAL
PATTERNS
Terima kasih!
!
Weaving richer connections
between people and brands
www.tapestryworks.asia
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Pricing in s SNAPP: The psychology of money

Presentation on the psychology of money and decision-making, including its impact on business and brand value. This was first presented at Asia Research Seminar in Jakarta on 11 June 2015. If you would like to see a longer version of the presentation with additional examples.
Published on: Mar 4, 2016
Published in: Marketing      
Source: www.slideshare.net


Transcripts - Pricing in s SNAPP: The psychology of money

  • 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.
  • 20. Divider slide PATTERNS
  • 21. Expectations shape experience
  • 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
  • 25. Terima kasih SIMPLE NORMATIVE AVAILABLE PERSONAL PATTERNS
  • 26. Terima kasih! ! Weaving richer connections between people and brands www.tapestryworks.asia

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