Q: I pitched a potential client yesterday on our product offering, which turned out to be 20 to 30 percent less than his current vendor. Yet this seemed work against me – he expressed some nervousness in converting to a lower-cost supplier. What gives?

A: Ever balk at something in the grocery store or mall that’s been drastically reduced? There’s actually some science to this. Jonah Lehrer, a contributing editor at Wired, wrote in his book How We Decide about an energy drink experiment at Stanford, where the researcher had two groups buy an energy drink; one at full price and the other at 30 percent off. Same drink, different results…

The participants were then asked to solve a series of word puzzles. [Baba Shiv, a neuroeconomist at Stanford] found that people who paid discounted prices consistently solved about thirty percent fewer puzzles than the people who paid full price for the drinks. The subjects were convinced that the stuff on sale was much less potent, even though all the drinks were identical.

 

There’s comfort for customers in the price tag if they’re willing to invest in higher-quality products. Is your product of the same quality? You’ll need to do some reassuring, and throw in the service element you’re willing to provide as well.

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