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Contrast is often used to influence buying decisions. In the business world, Contrast is often used as pricing camouflage. In the case of the $60 shirt, it may be possible to buy the exact same shirt at another retailer for $40, but the less expensive shirt isn’t present in the store where the comparison is taking place. What is present is the $400 suit, which makes the $60 shirt look like a bargain. Compared with a $2,000 computer, a $300 extended warranty appears inexpensive, even though it increases the total purchase price by 15 percent. Compared with a $30,000 vehicle, spending $1,000 for leather seats feels like a bargain. Compared with buying a $400,000 house, spending $20,000 to remodel the kitchen feels like no big deal.
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Absence Blindness is a cognitive bias that prevents us from identifying what we can’t observe. Our perceptual faculties evolved to detect objects that are present in the Environment. It’s far more difficult for people to notice or identify what’s missing. Examples of Absence Blindness are everywhere. Here’s a common example: great Management is boring — and often unrewarding. The hallmark of an effective manager is anticipating likely issues and resolving them in advance, before they become a problem. Some of the best managers in the world exhibit a quiet sort of competence: there’s little drama, and everything gets done on time and under budget. The problem is, no one sees all of the bad things that the great manager prevents. Less skilled managers are more likely to be rewarded, since everyone can see them “making things happen” and “moving heaven and earth” to resolve issues — issues they may have created themselves via poor Management.
Value can’t be created without understanding what people want (market research). Attracting customers first requires getting their attention, then making them interested (marketing). In order to close a sale, people must first trust your ability to deliver on what’s promised (value delivery and operations). Customer satisfaction depends on reliably exceeding the customer’s expectations (customer service). Profit sufficiency requires bringing in more money than is spent (finance).
A successful business, roughly defined, provides (1) something of value that (2) other people want or need at (3) a price they’re willing to pay, in a way that (4) satisfies the customer’s needs and expectations so that (5) the business brings in sufficient profit to make it worthwhile for the owners to continue operation.