Leave Your Supermodel Friends at Home
In his book Influence, Robert Cialdini tells the story of two brothers, Sid and Harry, who ran a clothing store in 1930s America. Sid was in charge of sales and Harry led the tailoring department. Whenever Sid noticed that the customers who stood before the mirror really liked their suits, he became a little hard of hearing. He called to his brother: “Harry, how much for this suit?” Harry looked up from his cutting table and shouted back: “For that beautiful cotton suit, forty-two dollars.” (At that time, it was a completely inflated price.) Sid pretended as if he hadn’t understood: “How much?” Harry yelled again: “Forty-two dollars!” Sid then turned to his customer and reported: “He says twenty-two dollars.” At this point, the customer would have quickly put the money on the table and hastened from the store with the suit before poor Sid noticed his “mistake.”
Maybe you know the following experiment from your school days: Take two buckets. Fill the first with lukewarm water and the second with ice water. Dip your right hand into the ice water for one minute. Then put both hands into the lukewarm water. What do you notice? The lukewarm water feels as it should to the left hand and piping hot to the right hand.
Both of these stories epitomize the contrast effect: We judge something to be beautiful, expensive, or large if we have something ugly, cheap, or small in front of us. We have difficulty with absolute judgments.
The contrast effect is a common misconception. You order leather seats for your new car because, compared to the $60,000 price tag on the car, $3,000 seems a pittance. All industries that offer upgrade options exploit this illusion.
The contrast effect is at work in other places, too. Experiments show that people are willing to walk an extra ten minutes to save $10 on food. But those same people wouldn’t dream of walking ten minutes to save $10 on a $1,000 suit. An irrational move because ten minutes is ten minutes, and $10 is $10. Logically, you should walk back in both cases or not at all.
Without the contrast effect, the discount business would be completely untenable. A product that has been reduced from $100 to $70 seems a better value than a product that has always cost $70. The starting price should play no role. The other day an investor told me: “The share is a great value because it’s 50 percent below the peak price.” I shook my head. A share price is never “low” or “high.” It is what it is, and the only thing that matters is whether it goes up or down from that point.
When we encounter contrasts, we react like birds to a gunshot. We jump up and get moving. Our weak spot: We don’t notice small, gradual changes. A magician can make your watch vanish because, when he presses on one part of your body, you don’t notice the lighter touch on your wrist as he relieves you of your Rolex. Similarly, we fail to notice how our money disappears. It constantly loses its value, but we do not notice because inflation happens over time. If it were imposed on us in the form of a brutal tax (and basically that’s what it is), we would be outraged.
The contrast effect can ruin your whole life: A charming woman marries a fairly average man. But because her parents were awful people, the ordinary man appears to be a prince. One final thought: Bombarded by advertisements featuring supermodels, we now perceive beautiful people as only moderately attractive. If you are seeking a partner, never go out in the company of your supermodel friends. People will find you less attractive than you really are. Go alone or, better yet, take two ugly friends.