Our spring-clean yielded several pieces of surplus furniture.
Among them was a bed base. We left it, disassembled and in perfect condition, in a box on the side of the road. Along with its unwanted companions. It was the only piece that didn’t go over the course of the weekend.
I originally intended to take the bed base to the dump with a trailer full of other stuff. But, I conceded, somebody might want it. Now, I couldn’t give it away for free!
On Monday, I set out to get rid of it.
I’m not exactly a market-place opportunist. I’ve been in my share of bazaars, but am uninitiated in the cut-and-thrust of the online scene. (Image: fruit market, Nairobi Kenya).
I checked the goods for completeness and cross-referenced the item with a brand-new listing. As I went to post a “give-away” ad on Facebook Marketplace, I had a thought. I haven’t been able to give this away once, what’s stopping it happening again?
Instead, I decided to request some non-negligible, obviously-bargain, amount of money. I landed on $30. Not high enough to warrant close inspection, but far enough from zero to not appear token.
Within half an hour of posting I had a mob of people in my inbox asking for the furniture. By midday it was gone.
Extraordinary. But why?
My kerb, based on local traffic data and some extrapolations, would have up to 8,000 cars pass it in a day. Lower that for a weekend, and we could assume that 10,000 cars passed it across two days.
That’s a wide distribution of an offer for free furniture.
Granted, posting it into Marketplace increases the concentration of people actually looking for household items.
But everything else went. Why not the bed-base?
The answer lies in the fact that people couldn’t believe a free bed-base was a good offer. It was too good to be true.
There must have been some deficiency. It couldn’t be trusted in disassembled form: what if a piece is missing, or the legs are wobbly? Wrong! It was a perfect bed-base. C’mon!
I have encountered an idea this week that explains our mystery.
In a complex and dynamic world, we rely on psychological short-cuts to make good decisions. These are sometimes called heuristics. The two heuristics I want to explore are “stakes” and the “contrast principle”.
Stakes
Rory Sutherland’s book Alchemy has been one of the reading delights of the year. He is a zany Advertising Executive with a distinguished career in the ad-game. The thesis of his book is that the human mind does not run on logic. Rather it follows something he calls “psycho-logic”. Advertisement is a long-winded and expensive means of taking advantage of that, to influence human behaviour.
He writes about one that piqued my interest this week.
The idea is that the you should always buy from the vendor with the most reputational damage at stake. The benefit of a strong reputation is trust. In order to continue trading on that trust, the reputation must be maintained. The stakes are high for the vendor and so, in turn, is the advantage. It also plays into the hands of the customer, who can rely on reputation as a good indication that a purchase will not be catastrophic.
Sutherland cites the apparent irrationality of people being willing to buy (at premiums) from the big-name brands. That isn’t irrational, he declares, it’s psycho-logic!1 The point is that a strong brand name provides the firmest guarantee against disaster. The stakes to the vendor are too high to allow otherwise.
As a contrast, he references the dicey option of investing in a Wang Wei TV for the basement-bargain price of $200. With little name reputation to lose, the stakes to the no-name Chinese electronics manufacturer are low. The guarantee of quality is not there.
“Rules” like this enable us to make decisions amidst endless options and uncertainty.
By removing my offer from the road and placing it on the public marketplace with a personal guarantee, I upped the stakes.
Implicit in the offer was a personal guarantee that the product was in-tact. I would be in some way liable for dishonesty, either chased up, harrassed, or shamed. They know where I live, after all.
Those stakes provided a short cut for the would-be acquirer of my bed base.
The inspection of the product, the investigation of its sturdiness - both were off-loaded to me. The risk of wasting time and effort was lowered. The stakes to me were no longer zero. And people jumped at it. No wonder. $30 all of a sudden appears a bargain for the comfort of reduced uncertainty.
Contrast
Another book I’ve dipped into this week is Influence by Robert Cialdini, a seminal book on the tactics of “compliance practitioners” and the psychological principles that underpin each of them. A compliance practitioner is one who gets somebody to say “yes” for a living; think fundraisers, sales, recruitment or votes.
In the opening chapter, Cialdini explores what he calls weapons of influence. One of them is the contrast principle. It takes advantage of our learnt heuristic that “expensive = good” (another version of what you’ve just read, originated from the principle that you get what you pay for).
He tells a story about a tailor-shop run by brothers. The front-of-house brother would pretend to be hard of hearing while measuring up a customer. Then when the customer enquired about price, he would call out to his brother bent over the sowing-machine. A scene would unfold before the customer as follows (read this in a New Jersey accent for maximum effect):
‘“Harry, how much for this suit?” Looking up from his work — and greatly exaggerating the suit’s true price — Harry would call back, “For that beautiful all-wool suit, forty-two dollars [forty-two dO’laz].” Pretending to not have heard and cupping his hand to his ear, Sid would ask again. Once more Harry would reply, “Forty-two dollars”. At this point, Sid would turn to the customer and report, “He says twenty-two dollars”. Many a man would hurry to buy the suit and scramble out of the shop with his “expensive=good” bargain before they discovered the “mistake”.’
This reminds me of the IKEA ad: “Start the caaaa’!” — a personal favourite and clearly dialed in to the contrast principle.
When we are presented with the cost of an item along with some greater price against which it can be contrasted, our likelihood of making the purchase is much higher. As the tailors evidence, the contrast number might not even be real, but the prospect of the bargain triggers action!
Funny how a pair of $500 dollar shoes is all of a sudden more affordable, if discounted from $1500.
When the bed-base lay on the gravel of my kerb, alone and rather unattractive, it’s relative value was zero. It would take the shrewd eye of a salvager or the impulsive optimism of a hoarder to see its value. But when I included a link to a brand new version of the item - retailing for $300 - the value became obvious. The customer could see what it looked like and note that it was selling for 10% of RRP.
Again, I’d provided a short-cut for the customer. I wouldn’t be surprised if middle-aged Ian who drove 20 minutes to pick it up, came more for the discount than for the need for a new bed.
Of course, I hadn’t thought through all of this when I made the post.
Rather, my choices reflected a pretty rudimentary understanding of what would compel me to consider buying an object.
Little did I know that I raised the stakes by attaching my name to the sale and provided evidence of contrast, triggering the “expensive = good” heuristic.
It’s good to see practice playing out in theory for once.
It’s also economics. I could tell you about negative price elasticity and Veblen goods, where the higher the cost the higher the demand - but I would be bull-shitting you because I nearly flunked econ at university and would be relying on Monsieur GPT.