The Secret of Pricing
Academia has a problem with names. They are not always, well, intuitive. Hyperbolic Discounting is an excellent example of a pertinent business area disguised in a difficult-to-interpret label.
Hyperbolic Discounting does not mean what you might think. If you take a look at the words in the name, you probably imagine it means embellished markdowns. However, Hyperbolic Discounting is a vital psychological concept that influences your customer’s behavior and could be getting in the way of your customer-driven growth.
Hyperbolic discounting describes how we undervalue the benefit of something that happens in the future. Also, the concept covers how we overvalue the cost to us for waiting for something. In other words, we want what we want right now, and if we have to wait, then you better offer us something good for our trouble.
Unlike many psychological concepts, Hyperbolic Discounting is easy to predict. Why? It is easy to anticipate because all of us have this bias for immediacy. When faced with a situation where we choose between gratification in the short term vs. more significant rewards in the long run, we feel tempted to choose the former over the latter. It is one more way that we, as a human race, are irrational.
Now, we can overcome our bias and make decisions that have long-term benefits, especially when it is something essential, like retirement savings or investing in life insurance to protect our family if something happens to us. However, with less critical choices in life, options with long-term benefits often get passed over for opportunities with immediate gratification.
One example from life is my diet. I know that if I eat less and exercise more, I will lose weight and feel healthier than I do now. However, the cookie I have in my hand will taste good now.
This episode of The Intuitive Customer explores the critical (and poorly named) concept of Hyperbolic Discounting. We explain in more detail what it means and how Academia came up with the name, as well as how you can recognize it in your customer’s behavior. Perhaps most importantly, we discuss how you can use it to promote customer-driven growth in your organization.
The Intuitive Customer podcasts help you take your Customer Experience to the next level by unlocking the “hidden” aspects of your experience and determining what really drives value for your customers.
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