Aug 10, 2018
I’ll be talking about the meaning of value on today’s behavioral
economics podcast. The past three episodes have been dedicated to
the “it’s not about the cookie” framework. Which shows that the
experience leading up to the sale matters more than what is
actually being sold or the price. I’ll talk about the difference
between value, price and worth and the perceived worth created by
the endowment effect.
Then I really dive into every aspect of value and how it can
relate to sales and persuasion. I talk about how value is often
based in our minds and how much we love something. I share the
importance of being realistic about price, worth and value when
selling things. I touch on the the way that herding, perceived
value, and loss aversion work together in things like bidding wars
and more on this episode.
- [03:29] Value, price, and worth are used interchangeably, but
they are not the same.
- [04:57] Price is what someone is willing to pay for a good or
- [05:30] Opportunity costs means something can only be used
- [06:04] Worth is the expected selling price of something.
Things have worth even if they are not being sold.
- [06:53] The endowment effect is the phenomena in our brains
where simply owning something causes us to find more worth in
- [07:22] I share an example where people were given a lottery
ticket and then refused to trade the ticket for two dollars,
because once they were endowed with the ticket they could see value
in its potential.
- [08:50] Value is the usefulness or desirability of a good or
- [09:16] Value is based on how much we love something. It's in
our minds and it's personal.
- [11:54] How in real estate people often overvalue their homes
because of the sentimental attachment.
- [12:32] How getting people to be realistic about the worth,
price and value is very important when you are trying to convince
them to sell something.
- [12:46] Herding is the brain's desire to be part of the
- [14:02] Our brains are trained to assume that the collective
consciousness of the group knows more than our brains on their
- [14:22] Herding, perceived value, and loss aversion work
together in things like bidding wars. Watch out when you throw
scarcity into the mix.
- [14:43] An example of someone buying William Shatner's kidney
- [17:23] The ripple effect of price as it makes its way through
the herd. As in two billionaires in a bidding war for rare
- [19:12] I talk about the Basquiat painting that sold for $110
million dollars and the man who bought it. The purchaser wanted the
painting because he was struck with excitement and gratitude for
his love of art.
- [21:15] The power of brands and how they give companies
- [24:21] How our brains get what they expect and a quote from
Dan Ariely the author of Predictably Irrational.
- [27:06] The value of a $200 grilled cheese sandwich.
- [28:00] Creating brand value with exclusivity and
- [32:34] How brands tell a story about who we are, and our
brains love stories.
- [33:02] Tahitian black pearls and creating value out of thin
- [35:47] With the pearl example, the price tag set an anchor.
The Winston name added exclusivity and scarcity, and the glossy
advertisement instilled confidence in the herd.
- [36:14] Our brains believe what they are told until they are
- [39:03] The placebo effect and how people actually think they
get more value when they pay more.
- [40:02] How price and perceived value are linked in the human
- [40:14] Measuring sticks for value like currency.
- [41:48] Value is subjective, in our heads, and it changes.
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