Compete Smarter, Not Harder: A Process for Developing the Right Priorities Through Strategic Thinking

CHAPTER 6

Understanding Your Customers in the Right Space

The Use of Choice Theory and Customer Choice Analytics

—The Story of the Coke and the Temperature Sensitive Vending Machine¹

This chapter kicks off with an exercise. You are tasked with discerning what the following eight management decisions have in common:

Decision 1: Framing. It's a hot summer day; temperatures are running in the high 90s with searing humidity. You've been running around in the scorching heat and develop a strong thirst. You spot a vending machine and gratefully make your way over to it. The price of a can of Coke posted on the vending machine is $1.25. However, there is a sign that states, “If the outside temperature is above 90 degrees Fahrenheit, then the price will be raised to $1.75.” Do you feel taken advantage of when you have to pay $1.75 rather than $1.25 because it's so hot outside? Seventy-seven percent of respondents in recent experiments did; they objected to such a pricing system and felt “gouged” and taken advantage of.

Now, imagine the following. You walk up to that same vending machine and the posted price is $1.75, but the sign now states, “If the outside temperature is below 90 degrees Fahrenheit, then the price will be reduced to $1.25.” Do you no longer feel taken advantage of? ...