Loss PreventionThe last few weeks I've been deconstructing some very common behaviorial economic tactics that drive consumer perceptions, namely the Decoy Effect, the Anchoring Effect, and the Framing Effect. Each of these is based on a cognitive bias known as loss aversion. As humans, we're wired to avoid loss to a greater degree than we are to acquiring an equal gain. What this means is that we will make decisions that protect us from potential loss out of proportion to what we see as similar potential…Keep Reading
Have You Been Framed?I guess I’m doing a series on the behavioral economic tactics used to influence or change perceptions of price and value as this week we're diving into the Framing Effect. You may recall that last week I discussed the Anchoring Effect and the week before I reviewed the Decoy Effect. So, what is framing? It’s when you actively impact people’s perception of value based on how you’re presenting information about what's on offer. An example might be listing your turkey burgers as being ‘97% lean…Keep Reading
Anchors AwayHi Reader, Ever watch an infomercial and get sucked into believing the amazing deal on offer? I sure have. Remember Richard Simmons’ Deal-a-Meal? How about the Shamwow or Chuck Norris' Total Gym? One of the hallmarks of any infomercial is the infamous and all important question, “How much would you expect to pay,” followed by a list of prices. This technique is all about what's called the Anchoring Effect. As humans, we are deeply influenced by the first piece of information we receive when…Keep Reading
The Decoy PloyHave you ever wondered why the price of a large drink or popcorn at the movie theater is not that much more than the price of a medium? It’s because the medium is a decoy. Its purpose is to change your perception of the value of that large soda or popcorn and drive you to buy it rather than the more economically priced small. This is a perfect example of a pricing tactic called The Decoy Effect. One of the most famous examples of the decoy effect is employed by The Economist magazine. Way…Keep Reading
Cash In / Cash OutDuring my business model series earlier this year, I mentioned cash vs accrual accounting. (See The Cost of Doing Business) Some folks reached out to me to ask about the difference between the two, so I thought I’d answer that question along with providing some additional context. Legal Disclaimer: This is purely for informational purposes only as I am not a financial, accounting, or tax professional. Now that we've gotten that out of the way. Let's get into it. Generally speaking, the two…Keep Reading
Live and LearnLast week, I confessed that I don’t read business books anymore, preferring to watch a workshop or presentation instead. (If you missed it, check out Is Reading Fundamental?) So, I thought I’d share some info about a course I’m auditing for free online entitled ‘Wealth and Poverty.’ The course is taught by University of California at Berkeley professor Robert Reich, the former Secretary of Labor under US President Clinton, who is also a noted economist and mainstay media figure. Reich is a…Keep Reading
The last few weeks I've been deconstructing some very common behaviorial economic tactics that drive consumer perceptions, namely the Decoy Effect, the Anchoring Effect, and the Framing Effect. Each of these is based on a cognitive bias known as loss aversion. As humans, we're wired to avoid loss to a greater degree than we are to acquiring an equal gain. What this means is that we will make decisions that protect us from potential loss out of proportion to what we see as similar potential…Keep Reading
I guess I’m doing a series on the behavioral economic tactics used to influence or change perceptions of price and value as this week we're diving into the Framing Effect. You may recall that last week I discussed the Anchoring Effect and the week before I reviewed the Decoy Effect. So, what is framing? It’s when you actively impact people’s perception of value based on how you’re presenting information about what's on offer. An example might be listing your turkey burgers as being ‘97% lean…Keep Reading
Hi Reader, Ever watch an infomercial and get sucked into believing the amazing deal on offer? I sure have. Remember Richard Simmons’ Deal-a-Meal? How about the Shamwow or Chuck Norris' Total Gym? One of the hallmarks of any infomercial is the infamous and all important question, “How much would you expect to pay,” followed by a list of prices. This technique is all about what's called the Anchoring Effect. As humans, we are deeply influenced by the first piece of information we receive when…Keep Reading
Have you ever wondered why the price of a large drink or popcorn at the movie theater is not that much more than the price of a medium? It’s because the medium is a decoy. Its purpose is to change your perception of the value of that large soda or popcorn and drive you to buy it rather than the more economically priced small. This is a perfect example of a pricing tactic called The Decoy Effect. One of the most famous examples of the decoy effect is employed by The Economist magazine. Way…Keep Reading
During my business model series earlier this year, I mentioned cash vs accrual accounting. (See The Cost of Doing Business) Some folks reached out to me to ask about the difference between the two, so I thought I’d answer that question along with providing some additional context. Legal Disclaimer: This is purely for informational purposes only as I am not a financial, accounting, or tax professional. Now that we've gotten that out of the way. Let's get into it. Generally speaking, the two…Keep Reading
Last week, I confessed that I don’t read business books anymore, preferring to watch a workshop or presentation instead. (If you missed it, check out Is Reading Fundamental?) So, I thought I’d share some info about a course I’m auditing for free online entitled ‘Wealth and Poverty.’ The course is taught by University of California at Berkeley professor Robert Reich, the former Secretary of Labor under US President Clinton, who is also a noted economist and mainstay media figure. Reich is a…Keep Reading