"Some like 'em cheap and some like 'em expensive..."

Here’s a fruity little story. Sir Jack Petchey -?English businessman and philanthropist who recently died just two years short of his century – started out with nothing but a dream and ended up with over ￡500 million to his name.

And it all began with a fruit. (Or was it a vegetable?) Let me explain…

Whilst still in short?trousers, Sir Jack received his very first business lesson from the indomitable?Eric Woods, greengrocer. The shopkeeper ordered Jack to split a box of tomatoes and price one half 50% higher than?the other.?

The reason? “Some like 'em cheap,” Woods opined. “And some like 'em expensive.”

This lesson in business is as relevant today as it was in the pre-war East End.

Daniel Kahneman (winner of a?Nobel Prize in Economics)?explored this?very concept and referred to it as ‘anchoring’. And it’s what I often talk about in my own work (though I’m still waiting for my phone call from Sweden).

You see, when shoppers are hurriedly buying products, we evaluate whether something is good value or bad by comparing it to a so-called ‘anchor price’. And it’s a price that’s often utterly irrational.

Kahneman proved this in a series of experiments, which the BBC’s Horizon replicated in a documentary about his work a few years back. A random bunch of people were asked to pick a ping pong?ball?out of a bag. All they’d been told was that the bag?contained a hundred balls numbered 1 to 100.?

And as is often the case in psychology experiments, this little test was rigged. Every single ball had the number ‘10’ written on it.?

Then the?same people were shown a bottle of champagne?from a mystery brand and were told it was a high-quality vintage. They were asked to estimate?a price for the bottle. The average price came out at ￡15.

The experiment was then repeated with a new set of people, but now all the balls were numbered 65. This time, these folk estimated the price of the champagne at a cork-popping ￡47. The ping pong ball - obviously unrelated to wine?- had set an anchor in people’s minds,?dramatically shifting their perception of value.

And that’s how the ‘Good, Better, Best’ pricing structure so beloved of supermarkets works. People’s propensity to choose the middle ‘Better’ option when faced with a higher ‘Best’ priced item sets an anchor. And that means we perceive the middle option as good value – but stretch to the upper tier when we feel the urge to splash out. ??

In one of my favourite?books?Priceless,?William Poundstone recounts?how?Williams-Sonoma reaped unexpected benefits after launching a fancy bread machine priced at $429.?This high-end model fell flat as a pancake - but sales of the $279 model (previously the highest-priced unit) rose by almost 100%.

So, when you need to sell something for a good price, here’s a free tip from influence consultant Dr Kelton Rhoads: set a false high anchor which you expect to be rejected, then retreat to the price you’re truly happy with.?

After all, you’d be bananas not to.

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