Self-herding happens when we believe something is good (or bad) on the basis of our own previous behavior.Herding happens when we assume that something is good (or bad) on the basis of other people’s previous behavior, and our own actions follow suit.“The first anchor influences not only the immediate buying decision but many others that follow.”.Price tags become anchors when we contemplate buying a product or service at that particular price.“Initial prices are largely ‘arbitrary’ and can be influenced by responses to random questions but once those prices are established in our minds, they shape not only what we are willing to pay for an item, but also how much we are willing to pay for related products (this makes them coherent).”.“The basic idea of arbitrary coherence is this: although initial prices are ‘arbitrary,’ once those prices are established in our minds they will shape not only present prices but also future prices (this makes them ‘coherent’).”.
“We not only tend to compare things with one another but also tend to focus on comparing things that are easily comparable-and avoid comparing things that cannot be compared easily.”.“We are always looking at the things around us in relation to others.”.Why? Because even though people generally won’t buy the most expensive dish on the menu, they will order the second most expensive dish.
Gregg Rapp, a restaurant consultant, discovered high-priced entrées on the menu boost revenue for the restaurant-even if no one buys them.“Most people don’t know what they want unless they see it in context.”.We tend to focus on the relative advantage of one thing over another, and estimate value accordingly.“Humans rarely choose things in absolute terms.”.
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