The Rider and the Elephant – A Guide to Pricing

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Ian Tidswell provides insight into the psychology of pricing.

Why are we often less than completely rational? Delving into psychology, one can think of the brain as having two types of circuits: system 1 and system 2 (Kahneman) or elephant and rider (Haidt).

The elephant (system 1) acts quickly and seemingly automatically, following a set of pre-programmed rules. It’s in control when you react to seeing a family member, catch a ball thrown at you, answer simple questions like 2+2 and make associations like “bread and b….”.  Practice and experience “trains” the elephant and results in situations like driving home from work and not quite knowing how you did it.

The rider (system 2) is our “executive thinking”. It’s logical, deliberate and slow, taking concentration and effort. It’s in control when you are engrossed in a movie, look for someone in a crowd, solve a problem, or do almost anything for the first time. When the rider is active you may lose track of what’s going on around you, letting the elephant get on with mundane activities.  However, the rider is lazy: if it thinks the elephant has things under control, it will go with the flow.

 

Key points include:

  • What pricing elephants are
  • How to get better pricing outcomes
  • Building a strong foundation for pricing decisions

 

Read the full article, Getting the Elephant to Smile, on EenConsulting.com.