Can Cognitive Biases be Used to Fix Prices? | Entrepreneur India

How should we price our product? Should we start low, deliver value and then demand a higher price? Or should we start high?

Price-Quality Heuristic

Most people are aware of price-quality heuristic, maybe not by that name. Heuristics, simply put, are the mental shortcuts that people employ to make quick judgements. Price-quality heuristic is the essentially the connection one tends to build between price and quality. In other words, the high price is high quality. The price-quality heuristic forced to answer the broader question- how do we want to position ourselves. Do we want our firm to be a no-frills version of big Market Research firms or do we want to be the domain specialist? We knew we wanted to be the latter, so we decided not to price ourselves lower than the incumbents. Awareness of price-quality heuristic helped us make that call.

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Can Cognitive Biases be Used to Fix Prices?.