If you think discounting the price of your product would increase its attractiveness in the eyes of your customers, think again. 

Remember the last time you wanted to book a flight ticket? 

You check the flight prices and think of your options. The next day, you check the prices again, and you see the prices have gone up. You regret not taking the decision on the spot, and you tell yourself… 

“I could have saved.” 

You hesitate again, thinking you could get a better deal. You think tomorrow the prices could change. You wait. You check the prices the next day, and guess what? The prices have gone up again. 

“That’s it,” you say. “I am buying my ticket now,” you tell yourself. 

You buy the ticket. 

Your mind is rushing to buy, thinking the tickets will become even more expensive. Perhaps they would run out, and you wouldn’t find tickets in the travel dates you want. 

You perceive the ticket as more valuable.


Now, think about the last sales that took place in the shopping malls.

One day the jeans cost $200, and the next there is a sale where it costs $150. You know there would be further sales coming down the line. You have a choice to make. Buy it for $150 or wait for another price reduction? 

“It depends,” you think. “If I love it, I would buy it. After all, my size could run out.”

Maybe you wait. You think you can buy it for $100 instead. Your size did not run out, and you find it the next day for $75, not even $100. 

You either grab it or think,

“What’s wrong with these jeans? Why no one wants to buy them?” 

You start doubting it. You wonder. Is it good enough? Is it of good quality? You hesitate. Perhaps you buy it, perhaps you don’t. One thing remains though, 

You perceive the jeans as of less quality or less desirable.


What I just explained in these two examples is a consumer behavior principle, called the ‘the price placebo’. 

As described in the book, The Advertising Effect: How to Change Behaviour by Adam Ferrier and Jennifer Fleming

“It sounds odd, but it’s much easier to raise the price of an item than it is to lower it. Let me show you why. What would you think if a product you like to buy was suddenly lower in price? You might think the quality has gone down, or it’s not selling well. If the same product has a price rise, it suggests it’s popular and in demand.”

An experiment that demonstrated people enjoy more expensive wine as compared to the cheaper ones could shed some light on this concept.

People think expensive means better quality. 

“At Stanford University, Baba Shiv (Shiv, Carmon & Ariely 2005) tested the effect on people’s brains when they believed they were drinking a more expensive glass of wine. Using an MRI scan, he watched what happened to the brains of drinkers who believed their wine cost $5 compared with another group who were told the same wine was worth $45. The wine was exactly the same, but the brains of the people who believed they were drinking the expensive drop lit up like a Christmas tree in the area that shows pleasure. They not only believed the wine was superior, but their brains also reinforced this belief.” — Adam Ferrier, The Advertising Effect: How to Change Behaviour

The bottom line is if you want to ensure your product is perceived as premium and of great quality, increase the price. If you want them to act now and buy it, let them know the price could potentially increase tomorrow from $500 to $900, and watch this trick works its magic. 

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