Berger: Practical Value and Reference Points

This is the 6th post in my series of Jonah Berger’s book “Contagious”. The book offers alternative explanations why some messages go viral and others do not.  Important stuff if we want to ramp up the effectiveness of our own messaging.  The next area to look at is practical value.

Here is the key idea – people love to share things that have practical value. Like a video on how to shuck corn  more easily, or how to create space in your closet.  The value is seen in the eye of the beholder.

And that last sentence tells us something incredibly important about deals. Saving money is practical, and people like to share information about deals. But … the way these savings are perceived is a bit tricky. Dan Kahneman brought this out in his study of !bounded reasoning* (for which he won the Nobel prize in economics). Dan discovered that people do not make choices between value on a strictly rational basis. Instead, we use reference points to assess relative value. So $100 off the regular price of $350 sounds a lot better than $10 off the regular price of $250 — even if the prices are for the same thing.  Indeed, just marking an item in an online catalog as “on sale” will tend to increase sales, even if the price is in fact the regular price.

For the same reason, the difference between $120 and $110 seems less than the difference  between $10 and $20.  As the reference point gets bigger, the $10 difference appears to be smaller — even though in fact, it is the same. And this helps us understand why putting limits on the offer “today only!” or “one per family” creates a reference point that makes the deal look more attractive.

A practical rule emerges from this.  Would stating your discounted price work better as a % reduction or actual price reduction? 10% off or $30 off? The answer is that it depends on the original price itself. It if is over $100, then you are better off stating the discount in terms of the dollars saved. If it is under $100, then you are better off stating the discount in terms of the percentage.

But the sharing value of practical information goes beyond just money saving. The web is loaded with information passed along because it may help with something people do — retirement, health, diet, and on and on. You might notice that the most shared practical content is short and easy to use – the ten best ways to lose 10 pounds is better than a 30 page peer reviewed scientific article.

Because people will tend to share these things, we are at risk from the sharing. Things that seem remarkable — for example the idea that vaccines might cause autism — get shared even when they are proven to be false. People often just don’t find out about the debunking. So beware!



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