The Psychology of Price: How to use price to increase demand, profit and customer satisfaction Paperback – 2 Nov 2012
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About the Author
Leigh is a pricing expert and leading researcher in behavioural economics, writing the UK's most popular behavioural blog (www.knowingandmaking.com) and appearing as a frequent guest on BBC News. By background a mathematician and economist, he is the founder and chief executive of Inon, the UK's leading pricing consultancy.
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Top Customer Reviews
Most people are aware of the 99p effect, but it turns out that the psychology of price goes much deeper, with techniques such as anchoring, bundles and decoys able to create substantial shifts of consumer behaviour while increasing overall margins.
Author Leigh Caldwell builds up a strong and coherent picture not just of how price psychology works, but also of how you can apply it in your own situation. Although his main narrative is in restaurants and retail, he gives good attention to services, consultancy and tender-bidding, which means there should be something for everyone here, as long as you are actually involved in price setting.
Unlike many books which have grown out of training courses, the Psychology of Price has successfully made its way into the book form, and this is largely due to the author's inspired use of narrative to take us there. The Chocolate Teapot Company is weirdly plausible, but it's the twist at the end which makes this a tale worth telling in its own right, rather than just a series of amusing fictional anecdotes.
I raced through this book, but you can also follow it more carefully using the charts and exercises as you work on your own products.
This is one of my top recommendations for business reading in 2013.
It is very easy in business to see cost from the perspective of the seller and Caldwell encourages one to work back from the angle of the buyer. The concepts he expounds are not profound or novel but did enlighten in the way that something only seems obvious once it is expressed. Very worthwhile to stimulate strategic thinking and with a helpful bibliography for anyone who needs to read to a greater depth on the subject.
Caldwell's training was as a mathematical economist and he runs a business advising on price modelling. He therefore knows how to apply the concept and my sense that the examples were lightweight is probably the product of his efforts to communicate what are abstract concepts. Overall, he achieves this effectively. Recommended for anyone who runs a business or who works for a business at the interface between marketing and finance.
This is an okay book if you've never, ever considered the effects of pricing on your business, or played around with added value concepts, but the information presented is quite limited and basic. I get the impression it's been written for both the UK and US markets in one go, so has had to remain quite non-specific.
The book moves along through the story of a fictitious company, so a lot of the book is given over to the made-up narrative of that company. There are very few factual "Company X did this and they achieved Y" examples, or citations of real research, you just get told that fantasy company followed the author's advice and their fantasy business flourished. Not exactly real world proof...
My other concern is that the author is winging it a little in some areas. The story of the florist who wanted large corporate business, and achieved it through asking strangers on LinkedIn is so utterly ridiculous it's laughable. (As a florist I can tell you there's only one way - You walk in uninvited with a whacking great showpiece arrangement.)
Some interesting points to consider, but not enough evidence or fact to make me act on the advice directly.
I then started looking for a book that told me more, and this has turned up trumps. By coincidence, Rory Sutherland is quoted on the cover.
This book explains in great detail how perceptions influence our willingness to pay a premium for products. I've been self-employed for 12 years, but this book is helpful because it explains what I've always suspected and observed, but it helps me act with greater confidence when I'm planning my sales. The only downside is that the fictional example that drives the book is 'chocolate teapots' - a product concocted from a mixture of liquid chocolate and tea leaves. As someone who loathes the experience of the branded coffee chains, the thought of such a sickly soup made me queasy while reading.
Also, having read books on how to manage your money better, I find that this book applies all the techniques that get us into debt in the first place. Didn't some form of hyperbolic discounting cause the credit crunch?
Nevertheless, this is an essential book for anyone involved in selling. It's easy to follow and structured in a way that makes the points clear and digestible. Going round the supermarket I can spot all the techniques in action. The book uses storytelling in an effective way, and it's supported by online resources available on a website. The last chapter was a bit of a surprise, but it gave me a fresh perspective on what business is ultimately about.
Most Recent Customer Reviews
Haven't been able to finish reading this but this is awesome.Published 3 months ago by Messiah Ozioma Odinma
Excellent book to develop an understanding of different pricing models and how they work. A good read for those starting with a new business.Published 8 months ago by D S ENDERSBY
This book does present good ideas to use price as a marketing strategy. The fictional accounts at the beginning of each chapter were a good device to explain each chapter method. Read morePublished 11 months ago by Ian
A lot of common sense info structured in a difficult and slow read. I gave up half way through (not something I do very often)Published 21 months ago by Matt
Brilliant in terms of sharing a wide variety of pricing offerings and structures and the benefits of each. Worth buying.Published 23 months ago by Scott
An approach to teaching a range of rpicing strategies through a story of a fictional company. Hardly novel but still effective as the product - chocolate teapots - have little... Read morePublished on 20 May 2014 by Jim Smith
The book is good for someone who wants increase their sales by pricing their product. It's a good book. Thanks!Published on 18 April 2014 by Sunny
As someone just discovering the world of pricing strategy a few months back, I found this book an invaluable primer as well as a thoroughly engaging read. Read morePublished on 6 Mar. 2014 by Luke Razzell