The Placebo Effect of Price

Surely you’ve heard a story like this…..

A man who has suffered with leg pain for ten years can be handed a pill by someone he thinks is a doctor – a doctor who tells him, “The pill in your hand has been shown to be 95.36% effective at reducing pain for patients similar to your age and size.” The doctor’s spiel continues enough to convince the patient he has a proven medical cure in his grasp.

He really believes the pill will end his pain.

And to the complete discredit of any good science or any good logic, the man’s leg pain stops…even though the magical pill he took was made entirely of sugar.

It’s called a placebo effect.  The patient’s body hurts less for no reason besides he was expecting the pain to subside – so it did.

By the time you finish reading this, you’ll be fully aware of price’s placebo effect.

Here’s the formula:  Expensive = Better

A scientific study revealed something quite amazing: A group of bodybuilders were split into two groups and separated.  Both were given the EXACT same energy drink before being told to exercise.  Group 1 was told their energy drink was purchased after a discount.  Group 2 was told their energy drink was purchased at full price.

Result: Group 2 reported a better, more effective workout than Group 1.

Interesting.

Then a group of students, split into two groups, were told to complete word puzzles.  Again, both groups were given the same drink but Group 1 was told their drink was purchased with a discount and Group 2 was told their drink was purchased at full price.

Result: Group 2 was more effective at solving puzzles than Group 1.

That’s an amazing placebo, wouldn’t you say?

The perception of having a more expensive, i.e. better quality drink, forced the consumer to have a better experience with the product.  The mind had predetermined expectations: the more expensive product gave more satisfaction.

The last thing I want you to know about this study is that the scientists argue the process happens on an unconscious level.  The consumer doesn’t understand their subconscious is forcing better experiences with higher priced products.

Haven’t you ever heard…

“You Get What You Pay For”

It’s important to have beliefs like this because we live in a world that’s rapidly growing and changing.  Everyone’s “To Do” list has grown over the years and life is more stressful than ever.  Seems like there’s always something to do, something that needs cleaning, fixing, someone who needs this or that…it goes on and on.

At any moment, a thousand different things could happen.  Your cell phone might ring.  You’ve got to finish that report by Tuesday.  Wash the car.  Pick the kids up from school.

We have to create shortcuts.

And this, my friends, is all you need to understand:

Price is a shortcut.

To the consumer’s mind, price is a flag that promotes one of the following: “This is cheap” or “This must be good.”

We use price as a way to filter out all the “junk” and go straight to products that are “worth every penny.”

And listen:

A higher price isn’t always higher…

You can leverage this psychology without jacking up your prices.  I can’t just point my finger and lecture, “Raise your prices.”  Many of you just wouldn’t be comfortable doing such a thing and that’s something I have to work with, not against.

Consider a change as small as this…

Instead of making your offer at a simple $19, try “Right now $19, Reduced from $50″

Perhaps the product was never $50, I don’t know…but the position the product now holds is that of a $50 product, now available at $19 if I act fast.  The product is not positioned as just another $19 ebook (as an example).

In the sales copy, use $50 as the price and then give a great reason why the prospect will only pay $19 if he buys right now.

That’s one small change that can create much better value perception and bank you more profits.