The behavioural science behind Netflix pricing and the Facebook loading screen

behavioural science Facebook loading screen

I thought the above example was pretty interesting. And this too, about Netflix pricing:

You don’t understand prices. You don’t buy things based on anything resembling “logic.” You buy things based on, well, something else— mental “shortcuts.” And Netflix wants to hack your mental shortcuts.

One way companies use prices to trick us is to offer cheapo, inferior goods to get us hooked on a product that we’ll eventually spend more on. Time Warner Cable, for example, experimented with an “Essentials” package that offered cable without the most popular channels at a discount, expecting (and, as I’ve been told, often discovering) that customers would upgrade to full cable when they realized how much they love TV.  In a way, Netflix is already doing this: In December, it introduced a $6.99 plan ($1 discount) that allows streaming to one screen only.

The more sophisticated strategy isn’t to offer two prices, but three. In Hasting’s words: “good,” “better,” and “best” price tiering. Why three? Because of the magic of the Goldilocks effect in pricing.

It reminds me of a great talk I saw some time ago about the way The Economist packages up subscriptions, as explained by Dan Ariely here.

The behavioural science behind Netflix pricing and the Facebook loading screen

Why labels work (if you’re not paying attention)

This idea is not new. Study after study reveals so-called connoisseurs are easily fooled by the context of the experience, whether that’s wine experts served cheap wine in expensive looking bottles, or art historians fooled by forgeries with convincing paperwork. But it makes for a cracking overview:

What does it mean for wine that presentation so easily trumps the quality imbued by being grown on premium Napa land or years of fruitful aging? Is it comforting that the same phenomenon is found in food and classical music, or is it a strike against the authenticity of our enjoyment of them as well? How common must these manipulations be until we concede that the influence of the price tag of a bottle of wine or the visual appearance of a pianist is not a trick but actually part of the quality?

Read the article here.

Why labels work (if you’re not paying attention)