Irrationality of Consumers
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Irrationality of Consumers

How do people make their buying decisions? This is a note from reading Predictably Irrational by Dan Ariely.
Irrationality of Consumers

You never know how good a deal you’re getting until you know about the other deals that exist, even though the deal offered to you is the best deal available. People will always want to compare between products and services before they buy. A deal only becomes a better deal when it’s compared to a lesser deal – this is the relativity in sales and purchase.

Relativity always guides a consumer’s buying decision. When a buyer is presented with one option, he will have trouble deciding because he has nothing to compare the option with. If he has two distinctly different options, he will struggle to make a 50/50 choice. However, when a third option is introduced with two similar options and one drastically different option, he will almost always choose the superior of the two similar options.

This is why Starbucks has a Tall, Grande and Venti option. Tall is cheap but too small. Grande and Venti are similar in size but Venti is expensive. Given these three options, people would go for Grande. There’s no rationale or logic to this, this is irrationality in play. Understand and apply this when you sell next time.

This is a lesson I learned from:

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions