Episode #027: The Psychology of Pricing with Kit Yarrow
In This Episode of The Buyer’s Mind with Jeff Shore:
Kit Yarrow, Consumer Psychologist and author, joins Jeff to talk about how price doesn’t determine the sale. As a sales professional it can be easy to fall into the discount mentality hoping that a better price will win the sale. Everybody loves a bargain but what determines if someone will actually buy it? Why do people buy some things at full price and at other times on sale? Tune in to find out.
Topics we’re going to cover on today’s podcast:
[2:41] Quote of the Day
[5:13] Sales Tip of the Day
[12:54] Buying like a consumer not an economist
[14:49] Emotional buying or logical buying?
[17:46] Pricing theory
[21:22] The allure of the bargain
[25:49] The endowment effect
[35:33] Motivational Summary
More about our guest Kit Yarrow:
Kit Yarrow is an award-winning consumer psychologist, professor and consultant. She’s author of the best-selling book, “Decoding the New Consumer Mind”, co-author of “Gen BuY” and a contributor to Time.
Kit’s home base is Golden Gate University in San Francisco, where she is Professor Emeritus. Her unique ability to apply clinical psychology to the field of behavioral economics has won her four endowed research professorships and recognition as the 2012 Outstanding Scholar of Golden Gate University. She has also been a visiting professor at the Helsinki School of Economics and taught consumer behavior at leading universities around the world. As a consultant, Kit has fielded research for and advised a wide range of organizations including Westfield Malls, General Electric and Del Monte.
As a widely recognized authority on the psychology of consumers—and on the Millennial Generation in particular—Kit is regularly quoted in a variety of media including The New York Times, The Wall Street Journal, NPR, and Good Morning America.
Links from today’s podcast:
Jeff: So what exactly is the right price? Well, let’s just say there’s a whole lot of science around that question and we’ll dig in on today’s episode of The Buyer’s Mind.
Announcer: Welcome to The Buyer’s Mind where we take a closer look deep inside your customer’s decision-making mechanism to reverse engineer the perfect sales presentation. Now, please welcome your host, Jeff Shore.
Jeff: Well, welcome everyone to The Buyer’s Mind where we investigate exactly what’s going on in the brains of prospects who are considering a purchase decision. That’s what this podcast is all about. It’s about taking a stroll through the mind of the buyer. It’s about getting to know that customer so well that the sale begins to roll out right in front of you. I’m your host, Jeff Shore. You can read the full bio in the show notes. You can also go over to jeffshore.com. Make sure you sign up for our free Saturday newsletter, a little Saturday morning inspiration to help you on your journey. As always, welcome by our show producer, Mr. Paul Murphy. Murph, how is it going today?
Paul: It’s going really well.
Jeff: So we’re going to be talking today about pricing psychology with Dr. Kit Yarrow. It’s an amazing conversation and I’m just looking at it from the perspective of what is sometimes referred to as the price quality heuristic. So Murph, here is the idea. You’re gonna have friends over and you know your friends like steak but let’s suppose for a moment that you don’t eat steak that much and you really don’t know. So you go to the store, you’re standing there in the meat section and you’re looking at all these different cuts of steak. How do you decide which cut of steak you’re gonna buy if you really don’t know your steak cuts all that well?
Paul: Well, I mean as you’re looking at the steaks, you’re looking at size, you’re looking at thickness, you’re looking at all those things but one of the things you’re looking at of course is price, right?
Paul: And so, you don’t wanna be cheap and get hamburger but you don’t wanna get filet mignon because that’ll blow the budget so you’re trying to find that middle ground that makes you look like you’d spent a little money on your friends, right?
Jeff: It’s kind of funny how that works too because even in that decision right there, there’s a whole lot to unpack. I mean, you know, how much do they like steak, how much do I like steak, how much I like these friends, what is their taste, what is their budget, what do they normally eat? And it’s funny because at the end of the day, we are going to look at it and we’re gonna use that what is sometimes called the price quality heuristic. We’re going to think, “Well, I’m spending more. It must be a better steak.” And that’s kind of what we’re gonna get into today talking to Kit Yarrow because the psychology of pricing is really, really interesting. But let me give you a quote of the day. I first heard this quote, boy, it was…I was a teenager. I don’t remember where I saw the quote but I remember this striking me as a teenager and it has stuck with me and it’s perfect for today’s episode. It’s from John Ruskin and this is what he says.
“There is scarcely anything in the world that some man cannot make a little worse and sell a little more cheaply and the person who buys on price alone is this man’s lawful prey.” Boy, that’s really something. This man’s lawful prey. Well, look, let me look at it this way. When is a good deal not really a good deal? Well, I often say that there is no such thing as a good deal on something that you don’t like very much and I have evidence for that and I would just ask you and challenge you right now, how many of you out there have an item of clothing that you have owned for 30 days or more and it still has the price tag on it? And my guess is the majority of you said, “Yes, I have an item of clothing I’ve owned for 30 days or more, it still has the price tag on it.”
I’m also gonna suggest that there’s a really good chance that the item of clothing you’re thinking about was purchased on sale but by contrast, if you paid full price for something that you are wearing right now, how soon after you purchased it did you wear it? And my guess is that you wore it right away. That’s what tends to happen. There’s a corollary quote here from Thomas Payne who says “That which we obtain too easily, we esteem too lightly.” And so if you think about it from that perspective, there is the idea that price can be a very misguiding, misleading thing and there is something deceptive about prices that relates to an evaluation tool. So today’s guest, Kit Yarrow, she’s studied these things in great depth. You’re gonna love that conversation.
And we wanna let you know that the podcast is brought to you in part by our good friends at Home Street Bank. They are our show sponsor. They’re also my lender of choice. I used Home Street the last time I purchased a home. I have to tell you it was the smoothest transaction I’ve ever had and I have purchased quite a few homes. They were professional, they were dependable, great rates, fantastic service. If you’re a real estate professional, you’re just not gonna find better people when it comes to taking care of your clients. So whether it’s banking, home loans, credit lines, whatever it happens to be, go to homestreetbank.com to learn more. That’s homestreetbank.com.
Well, before we get to our interview, let me give you your tip of the day and it is this: the earlier you talk about price, the more you jeopardize the sale. All right. Let me just say that again. The earlier you talk about price, the more you jeopardize the sale. A detailed conversation about price and terms too early on will only get you into trouble and let me tell you why. Because the discussion on price lacks context. Just think about it for just a moment. Let’s say you walk into my clothing store and I said, “Hey, good news. I’ve got a shirt at 50% off. Would you like to buy it?” Now that would be silly because we haven’t determined whether you want a shirt, we haven’t shown you, we have no idea whether it’s the right size, whether it’s the right…whether you even like the shirt, but now we’re talking about price?
It doesn’t make any sense at all. Why? Because the discussion lacks context. So when we get into a discussion about price before we are fully unpacked the needs of the customer and the problem they’re trying to solve, and the viability of our product or service to be able to do that, we’re missing huge points of context. We’re talking about price in the absence of any kind of emotional commitment to the product and that is very dangerous. Just think about a car dealer. Can you imagine walking into a car dealership where they say, “We’re gonna do things a little differently here my friends. We’re gonna take you into the back room and put you down in a cubicle with our finance manager and he’s gonna fill out this funky worksheet and you’re gonna haggle on the price and at one point, he’s gonna look at you and say, ‘Oh, I’m gonna get fired if I take this deal and my kids, no one will be able to afford their education.’ You’re gonna go through that whole process. You’re finally gonna arrive at a price and then you’re gonna go on a test drive.”
I mean that would be crazy. That would be absolutely ridiculous. So I wanna suggest you win a customer is bringing up price early on in the process. Make that general statement and you have to have this down. You gotta have it down solid. You gotta make that general statement just enough to take the price discussion off the table, especially the detailed price discussion. So you might be able to look at it and say, “Well listen, we can…” If for example you’re selling, I don’t know, recreational vehicles, so you might look at it and say, “Listen, you can spend $40,000. You can spend $150,000. It’s so different but listen, we can go into that in more detail once we determine whether we have something in the works for you.”
Or if you’re selling homes, you could say, “Well, our homes start at 340. They go up into the 380s but, you know, what we really need to do is figure out whether we have something that works for you. So we’ll go into detail on the price once we determine that we’ve got what you’re looking for.” So what are we saying to the customer? That pricing discussion, so noted, it’s on the agenda, we’re going to get to it, we’re just not going to get to it yet. So if you have to give out a very vague sense of what the prices are going to be, that’s fine but do not get into a detailed price conversation. It’s only going to get you in trouble. I want to invite you to join us for the 2017 Jeff Shore Sales Leadership Summit and Expo. This is to help you become a better leader for your team, to grow your business in ways you never thought possible, and take your career to the next level.
This is the premier gathering for real estate sales executives although I have to tell you, we’ve had people from all different industries and they’ve always gotten so much out of this but the target lessons are for real estate executives. And you’re gonna learn from the best of the best about what it takes to make you a better leader, manager, and coach, more insights, more strategies, and more aha moments than ever before. We’ve been doing these summits for years and they just keep getting bigger and better. Hundreds of leaders from all around North America and actually all around the world descend on Coronado, that’s right, just outside of San Diego at the Loews Coronado Resort. Bring your significant other, stay for a few days. We meet on Thursday and Friday but most people spend the weekend and listen, there are worse places to be in August than Coronado Island in San Diego. It’s absolutely spectacular. If you’re interested in attending the summit, just visit jeffshore.com/summit and if you use the promo code buyersmind, just all one word, no apostrophe, buyersmind, will take $200 off the registration price.
Alrighty. Well, let’s get to our interview. I first came across Dr. Kit Yarrow when I read her most excellent book, “Decoding the New Consumer Mind.” It was a great book and that led me to her blog and I’ve been a fan ever since. Kit Yarrow is an award-winning consumer psychologist. She’s a professor, she’s an author, she’s a consultant, she’s a speaker. She teaches at Golden Gate University in San Francisco where she is professor emerita. She’s an expert in consumer psychology and an incredibly insightful individual. Well, welcome to the show Kit. Glad to have you.
Kit: Thank you. I’m happy to be here.
Jeff: Yeah. Let’s have some fun. I absolutely love the book “Decoding the New Consumer Mind” and I just wanna sort of walk through the book. I wasted a couple of stacks of Post-it notes on the pages here so and I doubt we’ll get to everything but we’ll give it a shot. Let’s start with the title because the cover of the book, and we’ll put this in the show notes here, but the cover of the book, “Decoding the New Consumer Mind” as compared to the old consumer mind. So just let’s start right there. Why the title and what is it about the new consumer mind that piques your interest?
Kit: Yeah. I think because of a few sociocultural shifts namely, our use of technology, a much more individualistic society, a lot more emotionality. Because of these sociocultural shifts, I think that we think differently. You know, our minds are malleable, what we use becomes stronger, what we don’t, becomes weaker. And so, I think because of these shifts, we actually are psychologically different and that means what we want to buy, how we make decisions about what to buy, how we connect to brands, all these things have changed as well.
Jeff: It’s interesting because these things have changed and are changing and yet, if you speak from your academic background for a moment here, we see a corollary phenomenon that that which we are learning about the brain is all relatively new, right? A lot of the experts that we’ve have said that that the whole idea, the study of behavioral economics and even the neuroscience of the brain, this is all pretty fresh stuff.
Paul: Yeah. I remember actually sitting in a college economics class and thinking to myself, “But that’s now how we do it.” I mean that doesn’t make sense to me and I think so the older kind of rational man and I think that it’s called rational man instead of person tells you how old it is, I think the old rational man theory which is that people buy according to their own self-interest only is really doesn’t make sense because people actually buy things, spend money a lot around our connectedness to other people and sense of fairness. And, you know, all these psychological constructs are really, really important. It’s really not just a logical decision. There is so much emotion and so much psychology and right, that is really new. And now we can actually kind of look into the brain with some of our new neuropsychology techniques and we’re seeing…you know, and we have proof of all of this.
Jeff: You know, give us a little peek behind that curtain there Kit, because like when I read Richard Thaler’s book “Nudge” for example, he spends a lot of time…
Kit: It’s so good, right?
Jeff: It’s such a good book. He spends a lot of time contrasting the way that an econ would make a decision versus the way that a real person would make a decision. And so, those who are only focusing on the economics are looking at pure logic but a big part, a big sub-theme of your entire book is beware of the emotional state, right?
Kit: Yeah. So, you know, when I give speeches a lot of times, I’ll start it out with an experiment actually that Daniel Kahneman, who won the Nobel Prize in economics even though he’s a psychologist, used and that’s you ask…you give a couple, two people, $10 and you say, “You can divide that up anyway you want and one person is gonna make the decision and then the other person is gonna say yes or no.” And typically, people will give $5 and the other person will take that $5 rather than to get nothing but that is completely irrational. Rational man economic theory would say that it would be smartest to give a dollar, therefore you get to keep the most and the person would take a dollar because that’s better than nothing, right?
Kit: And yet, always, and, you know, and I’ve done this all over the world, always people pretty much settle around $5 because they’re more governed by rules of fairness and human connection then they are maximizing their gain and that also takes place in the marketplace. I mean a lot of people push back and say, “Oh, but, you know, that’s one on one. What about when people are in stores?” And we have ample research that suggests that also in any sort of buying situation, people are factoring in not just how do I get the most but also what’s fair and, you know, what connects me with other people.
Jeff: Let’s get into this. You state very, very clearly early in the book that people buy in order to elevate their emotional state. And, you know, this is something that we see a lot of and most of modern research is telling us that we have probably underplayed the role of emotion. Is there a way to sort of measure that? To what extent do people buy to elevate their emotional state because, of course, the logical components have to be in place. It’s not like we lose track of our rational mind here but is there a way to measure just how much of a purchase decision is made on emotion versus logic?
Kit: You know, I think that would vary a lot depending on the category. So, for example, when somebody is buying a house, of course there would be a little bit more logic, let’s hope at least, involved in that. Although, interestingly enough, when people are buying cars, they are just as emotional as when they’re buying wine. A lot of research has shown. A purchase like that, typically, the higher the risk which means, you know, will it affect my health, how much will it affect my pocketbook, how long will I keep the product, these things, these sorts of things elevate the risk of a product and riskier products, people tend to factor in a little bit more logic to the equation. Although I would say that it’s still primarily an emotional decision in a place like Europe, the United States, in developed countries where we have A, so many options and B, so much stuff already, and C, you know, our stuff is so reflective of our connectedness to other people.
Jeff: Right. We had Peter Noel Murray on who talked specifically about the idea of luxury purchases and how the more of a luxury purchase it is, the more of the emotion needs to be engaged just from the perspective of how do I justify this. It’s difficult to justify an ultra-luxury purchase on logic alone. You have to have to have that strong presence of emotion just to be able to say…to be able to make up a story as to why this makes sense to me, right?
Kit: Such an important point. I mean that’s a really good point. And, you know, and it’s interesting too that in this new world that we live in, the new consumer brain is actually evaluating a luxury purchase differently today too. You know, a lot of luxury now has to do with hassle reduction, how easy it is to buy something, how much friction is reduced in the purchase equation and that’s relatively new. It used to be really much more about the tangible aspects of the product.
Jeff: Yeah. But that thought that easy equals right in the consumer, it’s a little psychological hack there, right? That if it’s the easier something seems to me, the righter it feels to me. It’s a shortcut. It’s not necessarily always the safest shortcut but it doesn’t make any less real. You talk a lot in the book about these mental shortcuts, about the various heuristics the customers are gonna…that consumers are gonna carry around. Let’s get into that a little bit because already in this conversation, you’ve hit on two of my favorite subjects, Daniel Kahneman, who I would read the phone book if he wrote it and two, wine. So we’re all good. So let’s talk about that even to the point of pricing Siri, he had a great discussion of the book about pricing theory and about how people assess wine and I just think about that from the perspective of if I’m standing in the wine aisle and I don’t know what I’m looking at, what do I do? Where does my mind go? Can you address that?
Kit: Yeah. It’s so interesting. And one of the things that cracks me up about my field is how many studies are done on wine because I keep thinking like okay, so then we get done with the research and well, what are we gonna do with the wine? I mean maybe that’s entered to it. I haven’t personally done any research on wine but I’m sitting in wine country right now thinking this would be a really excellent idea for my next project.
Jeff: Sure. Absolutely.
Kit: But anyway, I think my favorite study in that field has to do with pricing and that’s that if people are told that they’re drinking a more expensive wine, they actually really like it better. And I think this is such a parallel to so many of the things that we buy. We don’t instinctively know how much things should cost. This is true for, you know, cars and clothes and wine and so many of the…toothpaste. We kind of don’t really know so we rely on pricing cues and other nonverbal cues, symbolics, to help us understand how much something should cost. And we sort of logically understand that things that cost more probably are better. And so interestingly enough, you know, wine is one of the most mysterious products out there. I mean people generally don’t understand wine. That would include me by the way. And they don’t understand why one wine would cost more but they do have the sense that more expensive wine must be better and therefore if you tell them a wine is more expensive, they will actually report enjoying it more than the cheaper wine.
Jeff: It’s interesting because it’s not just a perception at that point. It’s not just a price value connection or heuristic. I’m actually convincing my own brain that this is better wine simply based on the price that I have seen for it.
Kit: Exactly. Exactly. They enjoy it more. So it’s not I want it more because it’s expensive, it’s it taste better. It’s changed their perception of the product. I think this is one of the reasons the luxury category is so topsy-turvy because so, it used to be the quality of the way that it’s made, the hand stitching or whatever. You know, this all cost money, consumers could logically kind of make that assumption in their mind and they could understand that they’re getting something that will feel better, perform better, last longer and so forth because of it but then, the fashion world changed so much that wraps and expose seams and things that consumers don’t equate with quality are also, you know, in that luxury category. And this is like across the board. I mean people really just can’t make sense of pricing and therefore, they a lot of times look for these other symbolic cues to understand quality.
Jeff: Let’s continue this because I think the psychology of pricing is incredibly fascinating but I also, in my own observation as a practitioner, I see organizations get this so very wrong and to the point where they are actually assassinating their own value with the time that they think that they’re adding value. So on the one hand, we know that people love a great bargain, right?
Kit: Oh yes.
Jeff: And you talk about this in the book. You talk about the allure of the bargain and the whole idea of, you know, the fear of missing out and the rationalization that has to take place and everything. But on the other hand, when we see this item that’s right from the very beginning, it’s marked as 50% off and, you know, today only, it’s a special 20% more and if you have a coupon, it’s another 10%. Pretty soon, it’s, you know, take the shirt and I’ll give you $5 is that what it feels like and I end up so dramatically devaluing the product even before I pick it up off of the rack simply because I’ve been told by that company, this is not worth very much.
Kit: Exactly. That is such an important point and so true. And then, we’re in this constant race to the bottom. I think it started during the recession when people really just wouldn’t buy anything unless it was on sale because they were very, very afraid and that was genuine. I mean those reductions were genuine because, you know, consumers just weren’t buying any other way and stores were flooded with merchandise and for consumers, it was genuine. And then the whole thing just became perverted and what happened there is that consumers decided when they started spending again, they said, “Well, wait a minute. You know, I used to get these things at half off for 80% off. That’s how I shop now. I want those bargains.” And retailers were kind of looking at that whole equation and saying, “Well, we can’t like make any money at all under those circumstances.”
So they started creating these kind of fake bargain situations where they would, you know, and consumers became kind of like part of the game. So it turned into this game that everybody is losing because consumers really aren’t I think spending money wisely when they’re focused more on the bargain than they are and what they’re actually buying and businesses of course are eroding the value of their own products and their margins in the process. So to me, what makes sense is to look at okay, what’s the psychological need that’s being fulfilled by that bargain and I think primary is trust You know, one of the great changes that we’ve noticed in society is this erosion of trust in everything: in the government, in businesses, in religious institutions, certainly in the media and so forth. And so, what happens is consumers feel like they need some kind of proof or validation when they’re spending money that they’re not being taken advantage of, enter the bargain, and that problem is solved.
So I think what we can do is businesses need to find another way to validate their products and their pricing either through social media or their reputation in some way to enhance that trust rather than to keep going down that bargain route which, as you pointed out, has no good ending except for brands losing their value. And I think the other thing people are looking for with bargains is a reason to buy something. So our use of the internet has really made every product we could possibly want available all the time which makes it, you know, one of the things that retailers always relied on was the sense of if I don’t buy it now, it might not be there later or I don’t wanna get to the store again. All of that is irrelevant now. And so, what we have to do is give people a reason to buy now and bargains have been that reason for the past five or six years. I better get it now or it might not be there or this is a special limited time sale.
So there’s other ways like limiting the offerings that you have, making offerings location specific, creating other reasons to give people either a rationalization to buy now or a fear of missing out or proof of their shopping prowess. There’s other ways I think to get that psychological gratification and reason for purchase that people have been getting through bargains.
Jeff: Let me throw this out there and I’ll tell you about sort of how I have approached this as I have worked with groups before and then I want you to give me the kind of psychological background behind it. One of the things that I learned, I don’t know if this is original thought from the work of Kahneman and Tversky, but the whole idea of the endowment effect and that we tend to value something or esteem it more highly after we have actually purchased it and yet, if we’re getting something that’s on sale and we’re getting it because it’s on sale, it seems to have a countering effect. So I will ask audiences, you know, how many of you have an item of clothing that you have owned for 30 days or more and it still has a price tag on it? And invariably, an overwhelming majority of hands are gonna go up for people who said yes and then I ask the question, did you get that item on sale? And sure enough, the answer was still yes.
But then I’ll ask people, the same audience, how many of you are wearing an item of clothing that you paid full price for? You know you paid full price for it but you’re still wearing it right now. And again, the hands shoot up and then I ask the question, did you get it on sale, and no hands go up. So there is this idea of how much we esteem something according to how much of a discount mentality that we took into it. Unpack that a little for us.
Kit: Oh my gosh! You just hit one of my favorite articles I’ve ever written. So I wrote this for “Time,” I think about a year and a half ago, why we have things in our closets that we haven’t worn or have the price taken. I can’t remember the title they picked but it was my, by far, most popular article I’ve ever written. And one of the reasons was that, you know, that the bargains kind of inspire us to buy things that we don’t actually need or want. I mean that’s hugely part of it but other reasons like that, you know, when we’re shopping online, we can be shopping when we’re tired or tipsy or any number of other things that, you know, that people buy like they have one in black and it’s beautiful on them and they love it and then the yellow one goes on sale and so they decide to buy that one.
So again, we’re just stuffing ourselves full of things that aren’t necessarily the perfect thing for us. They’re the bargain thing for us and the gratification we’re getting from that is the thrill of the hunt more than the thrill of the product which absolutely I think makes that whole equation of valuing what we have more than what we don’t have kind of a little less relevant today than it was when that theory was first introduced.
Jeff: You know, it’s interesting because my sense is that when we introduce a price fixation too early into the process, that we actually cloud the thinking of a prospect of a customer who is considering a purchase. And I’m just thinking recently when my wife and I purchased a mattress and being in two different stores and the first store had the prices and the special promotions, of course, that they always have, but the prices were sitting there on top of every single bed. Here is the price for a twin and a full and a queen and the king. So as you move from bed to bed to bed, you could immediately differentiate by price but the other store that we went to, and by the way the store where we actually bought the mattress, on the mattress was a description of the bed and you actually had to open this little portfolio to see the prices underneath.
And what it caused us to do was to say okay, well, we’re focusing in here on the bed and then when we see a bed that piques our interest for some reason other than price, now we had to open this little flap to see what the price was afterwards. And what it caused us to do ultimately was to make the decision for the right reasons. And then secondly, we bought a much more expensive bed than we thought we were going to spend. So what happened? What happened in my mind, Kit?
Kit: Well, I’m thinking that somehow or another, you had trust for that store you went into.
Jeff: That’s true. Yeah, that’s true.
Kit: So I think the first thing that any retailer has to do is in order to get people to spend a little bit longer looking at the product before the price is to make sure that in some way, consumers…the shopper will know that they’re not going to be taken advantage of in that store. So, you know, a long time mattress dealer with a good reputation of fairness and so on or a mattress dealer that has a special promotion, like everything is gonna be on sale. So just look at what you like and don’t worry about it but in some way, consumers won’t spend a lot of time exploring prices or exploring product characteristics until they feel like they can trust the retailer and unfortunately, a lot of times, that goes along with a sale but increasingly, I think there’s room for retailers to get that trust especially through social media today which is just such a powerful way for consumers to talk to other consumers and elevate a retailer.
Jeff: But isn’t that also just the role of the representative, the sales representative for example?
Kit: Or salesperson. Absolutely.
Jeff: If I look at…if you go back to Robert Cialdini’s book “An Influence Theory” And he talks about likability being one of the key influencers, there’s just this sort of shortcut in my mind. It doesn’t necessarily have to be dead on accurate to be real but as a consumer, if I like you, I am more likely to trust you, if I trust you, I will be influenced by you. So there’s that direct through line from likability into trust. Yes?
Kit: Yes. Absolutely. I do think it’s more complicated today though because we’re working from an absolute and complete trust deficit. Do you ever see…I always rely on the Edelman trust barometer that comes out every year and this year’s, 2017’s, came out about a month ago and it was shocking. I mean we’re down to like people endorsing trust of businesses, government, media as down to like single digit. I mean it’s just the lowest it’s ever been. So I think it has to be, you know, I think it has to be an even more pronounced part of the retail equation if retailers are going to, you know, if retailers are going to be successful. I think they’re either gonna have to just continue to rely on bargains as a shorthand term for trust or they’re going to have to get endorsement from other consumers in some way but I think likability is definitely part of it. But, you know, it’s just like they’re coming from so far behind the curve today and we almost need more, I think a little booster shot.
Jeff: By the way, you pegged me on the mattress store. It’s a family-owned business in my town and one of my best friends is good friends with the owner of the company. There was an inherent trust before I walked through the door. That other store, mattress store, that I was telling you about is a national firm and there was really no inherent trust when I walked through the door so there you have it. Kit, you’re just absolutely amazing. I wanted to encourage anybody who’s listening, hop on over to kityarrow.com, K-I-T-Y-A-R-R-O-W.com and we’ll put that in the show notes as well but you can learn about Kit, you can buy the book or you can read the articles and if you’re an organization that’s looking for a really top-notch speaker, well, you just heard right here how talented Kit is. Kit, I can’t thank you enough. Fascinating, fascinating conversation and if it’s okay with you, I would love to have you back because I think we covered about maybe 3 1/2% of the book here.
Kit: I had a blast. Thank you so much. I’ll come back anytime.
Jeff: I appreciate that. Murph, how great was that? Was Kit Yarrow like the perfect guest for the show?
Paul: Okay. So how many guests have we had mention Daniel Kahneman because I think I should get paid a bonus every time somebody mentions Daniel Kahneman.
Jeff: That’s right. Daniel Kahneman, if you’re listening out there, come on the show but it tells you a little bit about Daniel Kahneman’s legacy because he is certainly one of the most respected people out there but I gotta tell you, Kit Yarrow has a legacy of her own. That’s some really, really good stuff.
Paul: She does, no, and I really enjoyed trying to get my head wrapped around how we buy with emotion. I know that we talked about that on the program before but in this particular case, I was trying to figure out okay, what is it that I’m doing when I’m making a purchase that is so emotionally driven and she really addressed a lot of those topics.
Jeff: Right. Yeah. It was interesting because I have a whole bunch of questions that I did not get to because we ended up just talking about the psychology of price most of the time which is, again, we’ll have to have Kit back to go into other areas but to me, looking at her takes on the psychology of price and how damaging it can be when we’re putting that price first viewpoint or lens by which we see a product, we’re probably going to get in trouble. And that whole idea of you bought something and a price tag is still on it, you heard Kit talk about this, right? Because she had that article that resonated so much, because we’ve all done it. So here’s what it comes down to. The idea that we make these fully logical decisions is pure folly. The idea here is there is logic that goes behind our decisions but ultimately, we are emotional creatures and we make emotion-based decisions. Great interview with Kit Yarrow.
Well, as we head into the wrap up, I wanna hit on one other thing as we’ve been talking about the psychology of pricing today and I’m going to recommend to you that part of your job as a sales professional is to save your customer from himself. Let me tell you what I mean by that. The price is an enabler. That’s it. The price is there as a value exchange. Now look, they may talk about it early on but this is not what is most important to them. Talking about price early in the process is a learned behavior that they think that they’re supposed to do but that does not make it most important. What’s most important is that they want to satisfy a need. They want to alleviate a pain. They want to move to a better future.
I’ll tell you somebody that you’re not gonna have a price discussion with and that’s somebody who has no problem. You are only talking to them in the first place because they have a problem, Many salespeople dig deep into price way too early and I’ll tell you why I think they do that. I think it’s fear based more than anything else. They’re afraid of having to defend the cost and so they jump in first as sort of a preemptive strike but you’re better than that. You understand the emotional needs of your customer and you know that the sooner you drag them into a price conversation, the more detached they get from their emotion. You know that they want to make a decision from their soul first, not primarily from their wallet.
So I just wanted to ask you, do yourself and your customer a favor, sell the way they want to buy. Find the problem, solve the problem, and then the price conversation will all fall into play. Well, listen, if you like our podcast, I really appreciate it if you would you subscribe to that and if you love it, a review would mean even more. You can go to iTunes to do that. Consider posting a link to this podcast on your social media page. We’d sure appreciate that but that’s a wrap on today’s episode of The Buyers Mind. I hope you enjoyed it. You can find everything you need at jeffshore.com but until next time, go out there my friends and change someone’s world.