“Human behavior flows from three main sources: desire, emotion and knowledge.” (Plato)
Perceptions of value are not only measurable, with some degree of error, but also malleable. Indeed, customer preferences are not as clear, accessible, and stable as economics textbooks predicate. Rather, one’s needs and wants shift across situations and time in ways that researchers in psychology and sociology have been mapping for years, and that business people are only now starting to grasp. A practical means to understand how customers deviate from rationality is to challenge established assumptions at each step of their engagement with a company—at each step of the customer “journey.” This popular lens helps us understand how the nuances of human thought and behaviour (should) influence even the most mechanical of pricing decisions. Importantly, while it is true that organizations can exploit anchors, nudges, and charms to sway people into buying something that perhaps is not in their interest, a more satisfying strategy in the long term is to use these concepts to motivate and empower. This ability is critical when the organization continues to invest in innovation, quality, and differentiation but faces customers who appear disinterested in anything but a lower price.