:1) The first rule is based on receiving separate benefits when buying a product or service. For example, people will generally be attracted to buy a product that offers a distinctive free gift to be collected separately. This is known as the 'separate gains' principle.
2) Next is the 'silver lining' rule. The put it simply, this rule indicates that we can hide the fact that cost is high by separately offering some type of benefit to the consumer on a later date, a rebate coupon, a percentage refund etc.
3) This rule is similar to the above mentioned ones except that it is done my making a loss as painless as possible. For example, instead of informing the customer that they will have to pay additional for some mandatory types of products or services, you can basically bundle it together and ask them to pay just once.
4) The next rule, to explain simply is to package small loss (or deductions) together with the big gain or profit. For example, in certain types of investment there are no up front sales fee when you buy. But when the time comes when you decide to cash it in after making capital gains, 'exiting' fees may be charged.
5) This rule states states that we feel more bad in losing something than we find pleasure in gaining something. As humans we are programmed to avoid danger and pain.
This is how insurance companies get you to buy insurance, by showing to you the large amount of pain you will suffer if you do not spend a little to insure yourself. BUT, the 'risk principle' states that as humans we tend to gamble on losses, or risk the chance of suffering a loss (that is why there are still so many individuals who are still uninsured.
So instead of the 'scare tactic', we should phrase messages in such a way as to show how wonderful a benefit may be if we can continue to enjoy that benefit. For example, an auto insurance company may show a customer how wonderful it is to get endless miles on his/her car without having to worry about the costs of a break-down. Or even, how great it would be to spend your money accessorizing your car instead of using that money on repairs.
6) The next rule you will be familiar with. It is the technique of 'buy now, pay later'. You have received offers asking you to take or try a particular product first before you open your wallet.
You've seen those 'try for 30 days and if you don't like it just return it with no obligations' ads. Of course during the trial period the marketer will try their very best to show you that you have made the best decision to try the product because you are such an intelligent person. Most often than not, after you have tried the product for a month, the reciprocity rule kicks in and you'd feel obligated to just buy the darn thing.
7) This rule can be considered the 'credit card rule' simply because it is exactly what happens when someone uses a credit card to buy something he/she cannot afford. Simply this rules shows us that we will be more willing to accept future losses, or part with money we don't have instead of losing what we currently have, or pay cash.
8) This is the best rule to describe stock traders who 'sell their winners, and keep their losses', which happens quite regularly. This rule again shows how the human mind tend to avoid the notion of suffering a loss.
You can always see how people tend to get in the denial and avoidance state when they have lost a person they care for. The human brain is programmed to forget pain we have felt in the past. That is why sometimes drivers who have been injured in a car accident before continue to test the speeding limits again after some time. This problem is termed as the 'sunk-cost trap'.
9) Here's a technique used by retailers to make a product seem value for money. This is the rule of 'list high, sell low', meaning you state a high list price, or the recommended/suggested retail price; and show a low price to entice and make it very attractive to the potential buyer. This rule takes the contrast effect into account.
Care should be taken though not to make the list price seem too high or unrealistic, especially when customers are able to compare the price of the same product elsewhere. This rule also involves when we show products of different prices to consumers.
It is known that when we offer customers higher priced versions of a product first, the customers will be more willing to buy the cheaper version shown later; but if we were to show customers the cheaper version of a product first and than show more expensive versions, customers will be more inclined to purchase the more expensive versions.
Retailers use this technique in a 'top-down' approach of displaying products, where the more expensive products are displayed at eye level, and similar item with a sales discount just below it.
10) The last rule is about 'exceed reference price'. This rule basically tell us not to frighten the customer at the point of purchase with information like extra charges, or any additional or hidden fees. In The Power of Persuasion: How We're Bought and Sold
, there are 2 hypothetical questions:Which would you choose:
A. A petrol station that advertises $1.39 per gallon of gasoline, but says that you can get a discount of 10 cents if you pay by cash; or
B. A petrol station that advertises $1.29 per gallon of gasoline, but also says that there is a 10 cents surcharge if you use credit card.
Most people will chose Option A, because it creates an illusion of an opportunity for savings. Option B just makes the customer get agitated for no reason because of the notion of having to pay more.
So don't unnecessarily scare the customer after you have painstakingly convinced him/her to buy your products. I'll leave you with 2 advice from Dr. Levine when you have a dilemma in deciding to buy something:
Ask yourself,
- Is it a good value NOW? Do not compare the price it was in the past, or compare how much your friend bought it for. Ask yourself whether the item you are buying is worth it's current price?
- Is it worth the cost to YOU? Levine mentions 'too-small-a-bill' index. Basically what this is is how worthwhile it is for you to buy something at that price there and than, and whether it is viable to go elsewhere to find the same product at a cheaper price. But by going elsewhere you will lose something which you can't get back - time. What about transportation costs? The extra effort and energy? What other opportunity costs are involved?
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