True Margin North

Behavioral Economics Glossary

The science behind how customers actually make pricing decisions.

Pricing decisions are behavioral decisions.

Every pricing decision a customer makes is filtered through cognitive biases, reference points, and heuristics that most operators have never studied. These are the behavioral principles applied in every True Margin North pricing diagnostic.

Prospect Theory
People evaluate prices against what they might lose, not what they might gain.
Loss Aversion
People work harder to avoid losing something than to gain something of equal value.
Anchoring Effect
The first number your customer sees changes every number after it.
Endowment Effect
People overvalue things simply because they own them.
Status Quo Bias
People prefer to keep things the way they are, even when change would benefit them.
Weber-Fechner Law
There is a threshold below which customers do not notice a price change and above which they revolt.
Sunk Cost
Economists say sunk costs should not matter. Real customers disagree.
Decoy Effect
A strategically inferior option changes which of the other options customers choose.
Price Elasticity
How sensitive are your customers to price changes, and how do you find out without guessing?
Willingness to Pay
The gap between what you charge and what customers would actually pay.

See how this shows up in pricing.

30 minutes. We will tell you if there is a pricing opportunity worth pursuing.

Book a Pricing Review