I recently watched a free webinar that ended with a big sales pitch. You get 8 different things valued between $297 and $1,997 for a total of $10,779, but you pay just $1,997! Um, no thank you.

I wonder how they determined the value of each part. Have they sold each of the parts for the price they are claiming is the value? If not, how do they know anyone would pay that much for it? It is more likely that they are setting a value based on the price that they would love to sell it for, but they have not because they know very few if any people will pay that price.

Why do they do this? They are using a persuasion technique where you lead the offer with a massive price that no one has ever paid (or ever will). When they tell you the actual price, it seems small in comparison. If price is important to you, this increases the likelihood that you will buy the product as it seems like a great value.

The technique is based on the contrast principle – when we see two items that are significantly different, we unconsciously exaggerate the difference on the second item. (From Influence by Robert B. Cialdini). It is helpful to know about this trick so you do not get bamboozled into buying something that you otherwise would consider too expensive.

This technique is used a lot in sales:

• After the clothing salesperson helps you select a big item, expensive accessories do not seem relatively cheap. If you bought the accessories first, you would probably spend less on them and the suit or dress would seem quite expensive.
• Realtor shows you a bad property, the good one you see next seems even more amazing.
• After you negotiate the price of a new car, the add-ons seem cheap.
• Small soda at the movie theater is $5, double the size for only 50 cents more! (The extra is nearly all profit for them.)

Two ways to use this knowledge:

1. If you want to keep yourself within a budget, always look at the cheapest items first. The more expensive items will be less appealing.
2. If you want to get something of really high quality, but tend to be tight with your money, look at the top of the line items first. Good quality mid-range items will seem like a good value.

Have you been affected by this technique? How will you behave differently going forward?