Frogs and Chocolate

It’s amazing to watch people freak out when the price of gas shoots up. You’d think we’d be used to it by now because it happens every Memorial Day. Like clock-work every spring, the price rises and the news media start covering the story on every broadcast. They interview people who are cutting back and taking the bus and others that are staying home from their summer road trips. And of course, they interview the man on the street who’s considering buying a new hybrid just to save a few bucks at the pump.

The funny thing is that gas prices consistently rise throughout the year, but normally at a steady pace, rather than the quick jumps we tend to see before summer. No one freaks out and considers buying a $30,000 hybrid when the gas prices slowly drift from $3.50 a gallon to $3.70. The slow pace allows us to get used to the price and we barely notice the difference on our wallets.

That’s the Weber Fechner Law at work. Essentially, the Weber Fechner Law states that large movements in price are noticeable, while small, incremental moves tend to go unnoticed.

Look at it this way, if you have a Snickers candy bar in your hand and I ask you to close your eyes as I place another Snickers in your hand, you’ll feel the difference. I just doubled the amount of weight in your hand. Now, pretend you’re holding a big bag of candy bars and I place another one in the bag while your eyes are closed. You’d probably not notice the difference. Small changes in weight (or price) are more noticeable when compared to the current weight or price.  Consider this next time you think about adjusting your prices. If you make small incremental changes, they’ll barely be noticed by your customers. Make a greater adjustment all at one time, and you’re likely to get pushback from angry customers. It’s like boiling a frog. Hope that helps.

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