Kelford Labs Daily: The value of less

“System 1 averages instead of adding.”

— Daniel Kahneman, Thinking Fast and Slow

When we’re trying to acquire a new customer, it’s tempting to throw in extras. Like a discount, an exclusive offering, or another “reward” for working with us.

But, instead of increasing the value of our primary offering, it might actually decrease it.

In his book, Kahneman suggests thinking about it this way:

Let’s say I want to sell you 10 antique books in perfect condition. You might assess the lot to be worth, say, $100.

But what if I offered you another set of 10 books, also in perfect condition, but I decided to “throw in” 10 more books that are ripped to shreds?

In a single evaluation (as in, they cannot compare options, they are only assessing the value of one lot at a time), people will be more likely to value the first set (with all its books in good condition) higher than the second set (with the same amount of good books, but with extra ruined books, too).

The valueless books drag down the perception of the good ones just by being there. Because our ancient brain doesn’t add values together, it averages them.

Now, I’m not saying that value-added offerings are tantamount to worthless junk. But I am saying that if they’re less valuable than your primary offering, they might be doing more harm than good.

It’s tempting to want to “seal the deal” by throwing in something extra, but we should be wary of it backfiring.

Better to be confident in our pricing based on our confidence in our quality, our understanding of our customer, and our focus on what they value the most.

Instead of trying to throw in extras that actually diminish our value rather than boosting it.