Case Studies – Pricing Model

The below case studies is about the change in consumers thought process when alternatives are given which make them think irrationally

Case study 1 – Economist Subscription

An ad for an Economist subscription gave 3 options

1.      Print only for $59
2.      Web subscription only access for $125
3.      Print and web access for $125

Obviously third option looks like the best deal. In an experiment with the above setup 16 subjects chose first option, zero subjects chose second option and 84 subjects chose third option. What if we remove second option and let subjects choose options first and third? The results should be the same right, after all the deal is the same, but only 32 chose the third option and 68 chose the first option.  It was only by the third options (Print and web access) relation to the option 2 (Web subscription only) makes the third option look so good.

The subscription makers for Economist knew this and used it to boost the sales.

Case study 2 – Cost of a wine bottle

A wine bottle was shown to few students. They were asked to write the last two numbers of their social security number (SSN) as the price of the wine bottle, on a separate sheet of paper given to them. Subsequently, they were also asked to write “Yes” if they would wish to buy the wine bottle for that price. And also quote what would be the maximum price they would pay to own that wine bottle. The experiment revealed, that the people having the highest number as their last two digit of SSN (ex: 99) bid the highest and those having the lowest number as their last two digit of SSN (ex: 11) bid the lowest. Now why would the students having the highest two digit SSN bid the highest for the wine bottle?

Because they have bid the price of the wine bottle in relation to their social security number.

07. August 2011 by Monica Gupta
Categories: General Management | Tags: , , | Leave a comment

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