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Placebo Effect vs. The Bargain Bin

Placebo Effect vs. The Bargain Bin

Liston Witherill
Liston Witherill
2 min read

Story #1: Lethal Sugar?

I was listening to Seth Godin’s new podcast and he shared a fascinating story about the Placebo Effect.

In it, Seth shares a story of a man suffering depression. The man was in a clinical trial and in the control group, taking sugar pills.

The man – unaware he was taking sugar pills – attempted suicide by ingesting large amounts of the pills. The pills, of course, were completely harmless.

But he was expecting to die, or at least cause substantial harm, and he was still physically reacting as if he had taken harmful amounts of the medication.

Story #2: Tight Shirts, Tight Budgets

Under Armour is a brand that’s seen a meteoric rise in the last 20 or so years. Started as an independent competitor to some of the biggest apparel companies in the world, it’s extremely unlikely that they’d become the household name that they are.

Recently, Under Armour struck up an agreement with Kohl’s, a retail chain that sells apparel. Kohl’s is known for frequently discounting, which in turn inspired other retailers selling Under Armour to discount their supply, too.

Soon enough, Under Armour undermined (pun intended) their market position as a premium alternative to Nike and Adidas.

Sure they moved more product, but they also lost the footing they spent years building as a premium brand.

Not worth it.

Story #3: Same Coffee, Different Cup

In the book Predictably Irrational by Dan Ariely (which I highly recommend), he did a little experiment with coffee.

He brewed a single pot of coffee. He then displayed in two ways: 1) the fancy way, with nice cups and serving ware; and 2) the not-so-fancy way, in styrofoam cups.

What happened?

People who drank from the fancy cup enjoyed it more.

What It Means

Our brains are the decoder rings of the world around us. Our brains are so powerful that they can impact our physical health.

That probably doesn’t matter in your business.

But our brains also decode value in the same way.

And we look for shortcuts to understand where value lies. Those shortcuts include price and presentation.

In your business, charing more may actually lead to higher satisfaction and a more loyal client base. I know, it seems counter-intuitive, but the examples abound.

Notes