Saturday, June 21, 2008

expensive plates

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/21/AR2008062100149.html

“The next time you sit down for a nice meal at your favorite dining spot, take a close look at the prices of entrees. More often than not, there are one or two really expensive items, and then there are a bunch of mid-level ones and then there are a few inexpensive ones.

“The reason those really expensive items are there—say, $50 for a seafood platter—is that they are the reference point. You will consider them, then perhaps consider them too expensive, but instead of trading all the way down for the cheapest options ($19), you will likely settle at the middle ($30), thinking you got a deal relative to the pricey entree.

The important part here the idea of anchoring—establishing a high reference price (the original iPhone) and then offering reduced price choices.

Without the initial high-priced offering (that may never be bought), the reduced-price choice would have seemed expensive.

Since many people will intentionally choose the middle of a given price range in order to be “reasonable”, we can push this middle range up considerably by artifically offering higher-priced merchandise.