When it comes to pricing, many companies overlook the critical role of perception in shaping consumer behavior. A fascinating example of this can be found in Robert Cialdini’s book, Influence: The Psychology of Persuasion. In it, Cialdini recounts a story about turquoise jewelry that highlights how pricing can drastically alter consumer perceptions of value.
The Turquoise Jewelry Incident
A shop owner in a tourist town struggled to sell a batch of turquoise jewelry. Despite the jewelry's beauty, it wasn’t moving off the shelves. The owner tried everything to promote it—better displays, discounts—but nothing worked. Frustrated, she left a note for her staff to slash the prices by 50% to get rid of the inventory.
However, a miscommunication led the staff to double the prices instead. To everyone’s surprise, the jewelry sold out almost immediately!
Why? Customers perceived the higher price as an indicator of higher quality. In their minds, expensive meant valuable, reinforcing the “Good = Expensive” heuristic.
The Psychology Behind Pricing
This example illustrates a key principle of consumer psychology: price influences perceived value. When people lack expertise or knowledge about a product (like turquoise jewelry), they rely on price as a shortcut to judge quality.
This rule is especially potent for:
Luxury items (watches, jewelry, designer clothes)
Specialized products (art, wine, technology)
Services with intangible value (consulting, coaching)
In these cases, pricing too low can backfire by making the product seem cheap or inferior, even if it’s of high quality.
Lessons for Companies
Understand Your Target Audience’s Perception of Value. Before setting a price, consider how your customers perceive the product’s value. Are they likely to associate higher prices with better quality?
Use Anchoring to Frame Value. Introduce a premium-priced option to anchor customers’ perception of value. For instance, offering a high-end version of a product can make the mid-range option seem more reasonable.
Be Strategic About Discounts. While discounts can drive sales, they can also diminish perceived value if used too frequently. Instead, create a sense of exclusivity around price reductions, like limited-time offers or loyalty rewards.
Test and AdaptPricing isn’t static. Conduct A/B tests, gather customer feedback, and analyze sales data to refine your pricing strategy over time.
Balancing Perception and Profit
The story of the turquoise jewelry serves as a powerful reminder that pricing is more than just a financial decision—it’s a psychological tool. Companies that strategically leverage the “Good = Expensive” rule can position their products as higher-value, building trust and demand in the process.
So, next time you’re setting a price, ask yourself: What story is this price telling my customers?
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