69 of 73 people found the following review helpful:
5.0 out of 5 stars
Priceless lessons in pricing, January 10, 2010
This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I ordered this book after a good review in the Wall Street Journal.
From the title it sounds like a fairly dry book on pricing theories for a professional marketing audience.
In reality it is a very entertaining, well researched book about how prices are set from all kinds of businesses, how consumers react to them - and why.
Having worked in marketing and as an entrepreneur for 20 years, I have come across some of the stories quoted in the book already. However, I was not aware, that a German professor (Hermann Simon) runs the biggest pricing consulting firm in the world, that restaurant menus are better designed without leading dots before the price (otherwise they guide the eye to the lowest priced item) or that supermarkets yield a $2 higher average shopping cart revenue if the path through the market goes counterclockwise instead of clockwise.
It will take some work to extract pricing lessons for your own business (you actually have to READ the book first!) but it is pleasant enough!
Oliver Fritsch
Cendesic Marketing
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76 of 83 people found the following review helpful:
3.0 out of 5 stars
Pretty good, though not quite what I expected, January 25, 2010
This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
I bought this book after hearing the author interviewed on NPR. In the brief two-minute (or thereabouts) interview the author mentioned some factoids that sounded fascinating and whetted my appetite for more.
Now having read the book, I have to say that, although I learned things about the human mind I never knew before, I was disappointed in how dry the book was overall. The first half was devoted to the history of psychophysics, and numerous experiments conducted over the last hundred or so years. These experiments have served to establish just how quirky, irrational and suggestible the human mind is with regards to numbers, and pretty much debunk the established notion among economists that humans behave rationally when it comes to numbers, always making decisions that will best benefit themselves (the mythical Homo Economicus). Although these experiments were all new and surprising to me, reading about them felt like reading a college textbook. Not exactly my idea of pleasure reading!!
Just about exactly halfway through the book, Poundstone gets more interesting. This is when he starts citing real-world examples of how savvy businesses take advantage of the mind's susceptibility to numbers (often using the service of "price consultants"), all with the intent of getting clueless customers to part with more of their hard-earned money. This part of the book was truly fascinating, as he talked about how super-pricey designer boutiques arrange merchandise in their stores, how restaurants design their menus, and how new and unknown artists price their work to gain attention.
Alas, this part of the book was all too short, as Poundstone soon lapsed again into talking about more experiments.
I did learn some intriguing things about how my own mind works. I had previously thought I was impervious to the influence of advertisers and marketers. Alas, I now realize that when it comes to the murky, arbitrary realm of prices, my brain is as suggestible as anyone else's.
My conclusion: the fascinating factoids mentioned in the two-minute NPR interview were THE entire interesting part of the book -- the rest of it is somewhat tedious and academic. I was pleased with the book overall and would recommend it, albeit only to someone else who is pretty nerdish and interested in this kind of thing. This book is definitely not for everyone.
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47 of 54 people found the following review helpful:
5.0 out of 5 stars
Fun-to-read, entertaining, educational, topical, February 12, 2010
This review is from: Priceless: The Myth of Fair Value (and How to Take Advantage of It) (Hardcover)
There is an intriguing irony (if not synchronicity) to my purchase of this book.
The story is, I had been trying to buy this book for a few weeks from Amazon.
But I couldn't (without incurring shipping fees), because Amazon had delisted the hardcover book from their catalog. Why would Amazon refuse to sell a new book by a prominent author? Well, ostensibly it was "retaliation" for the book publisher's (Macmillan's) request that Amazon charge higher prices for Kindle books published by Macmillan. Leaving aside the question of why users without a Kindle should have their ordinary book access restricted because of a pricing dispute over a product they do not want, the imbroglio raises two salient issues about pricing:
(1) Why is $9.99 (what Amazon wanted to charge) the "right" price for a Kindle e-book? Why not $12.00 or $14.00 (which Macmillan wanted to charge)? If you read some of the Kindle users' blogs, they are adamant that $9.99 is the right price, and that $14.00 is too high - but how do they know?
(2) Why would Macmillan care if Amazon charges too little for Kindle pricing anyway? It doesn't directly affect their profits (Amazon makes up the difference).
Well, as it turns out, the underlying framework behind both of these questions is carefully discussed and elucidated in this very book!
As to issue (1), Poundstone argues that much of what we think of as "fair" pricing is nothing more than a collection of cognitive fallacies and biases. The most important of these fallacies are the contrast effect (pricing taking on significance from neighboring prices) and the anchoring effect (we are drawn to a particular number). Poundstone illustrates these effects, and the process by which their importance was recognized first in the literature and then in consumer practice, through a long series of vignettes that recapitulate the genesis and development of pricing theory, behavioral economics, and psychological decision theory. So as it issue (1), Poundstone would probably argue that many of the reasons people give to support $9.99 as being more "fair" than $14.00 are illusory - that pricing is far more fluid and idiosyncratic than most people appreciate.
As to (2), Poundstone might argue that Macmillan is worried about the contrast effect. Macmillan would be concerned that even to a person who does not have nor intend ever to acquire a Kindle, the proximity of the $9.99 would make its hardback price of say $18.00 seem higher than it actually was to a consumer. So this book lends support to Macmillan's position as to issue (2).
Now, let me briefly get to the meat of the book.
The book is structured along the lines of that distinctive modern subgenre of popular economics books in which anecdote and biography are interwoven and are equal partners with theory and experiment. Careful measurements by colorful character, in the stories of these works, gradually overturns entrenched orthodoxy, first in a small-scale and then in the large. Popular exponents of this style include Malcolm Gladwell, whose Tipping Point, Blink, and What the Dog Saw are canonical examples; Michael Lewis, whose Money Ball described the impact of statistics on baseball; Thomas Bass, whose Eudaemonic Pie and The Predictors foreshadowed the more modern style and which treated the impact of statistics and nonlinear modelling (chaos theory) respectively; Sam Savage, whose Flaw of Averages is a good introduction to statistics in this style; and of course Steven Levitt with his Freakonomics series.
This book is a worthy and interesting addition to the genre. Of the many interesting anecdotes, my favorite was probably Eskildsen and the World Trade Center, and how Las Vegas turned out to play a major role in the development of psychology. The cast of characters, including ex-Israeli soldiers among others, was very entertaining. And the theory, although of course subject to some carping (no confidence factors in many of the studies reported, for example) highlighted the key points clearly and gave the reader clear paths for further knowledge.
Thus, I would recommend this book as a good introduction not only to pricing but also to behavioral economics and human decision-making generally.
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