Mental Money: Why People Pay $1/Day vs $30 Upfront for a Month's Purchase with Pedro Piccoli Soares

Pedro Piccoli Soares is currently Senior Executive Manager of AI Pricing at SIXT, a travel arrangement / car rental company that’s known to be a provider of high-quality mobility services. He mentors startups, and has an Engineering degree. He also has a purple belt in Brazilian jiu-jitsu. In this episode, Pedro shares his knowledge when it comes to behavioral economics as he and Mark talk about how it works in relation to mental accounting and pricing.   Why you have to check out today’s podcast: Discover why it’s important for companies to understand why they’re doing pricing and why they’re having a price change Understand why you should still be relative to your competitors’ price change even when they’ve already made the mistake of decreasing their prices Learn more about behavioral economics, its tactics, and its relationship with mental accounting and pricing   “So, we've mentioned several different effects of behavioral economics and several different examples of how they can be applied on real business. If you think about it, they were quite simple, right? It's really easy to test these kinds of things, and they can generate some really nice benefits to your company, for sure.” – Pedro Piccoli Soares   Topics Covered: 01:40 – The internship that led to Pedro’s shift from being an Engineer to doing pricing 03:09 – What Pedro loves about pricing that made him stay in it 05:34 – Why it’s important for companies to understand why they’re doing pricing and why they’re having a price change 07:38 – Being relative to competitors’ price change even when they made the wrong decision 10:20 – Talking about behavioral economics; what Mark doesn’t like about it 12:33 – Behavioral economics’ tricks: Pedro and Mark’s perspectives in relation to price endings in relation to mental accounting 18:49 – Discussion about what loss aversion is 20:38 – The use and importance of loss aversion, especially in business 23:23 – Behavioral economics and people’s buying decisions in relation to good, better, best 25:53 – Pedro’s piece of pricing advice for today’s listeners   Key Takeaways: “This is when you kind of lose the sense of why you're doing the price change. If you just follow your competition, if you don't know the reason why you're changing the prices, you can initiate a fight that in the end has no background or no reason to be happening. You are assuming that everything that they are doing is right, and that they know why they are changing prices. It might be the case, but might be the case that they are also doing something wrong and you're just following them. You need to understand your customers and what price changes will affect them. You need to have a reasoning you apply when you’re changing the price.” – Pedro Piccoli Soares “I totally agree that behavioral economics cannot generate as much value as pricing departments can generate. And it’s, on the other hand, a much nicer topic to talk about to show results. You can definitely play around and create experiments, and you can very easily show the results of a try, and it's something that calls people attention because it's actually behavior, and that's something that they do as well, right? So, everybody wants to listen and to hear about heuristics, or the mistakes, the biases that they take when they're making decisions. And that's why I think it's a topic that costs more attention than pricing.” – Pedro Piccoli Soares “When you have two different people, we have so many different characteristics that it's harder to compare. And if you have just two similar options, one, which is clearly worse than the other, you make the choice easier.” – Pedro Piccoli Soares   People / Resources Mentioned: SIXT: https://www.sixt.com/ Dan Ariely: https://danariely.com/   Connect with Pedro Piccoli Soares: LinkedIn: https://www.linkedin.com/in/pedro-piccoli-soares/ Email: [email protected]   Connect with Mark Stiving: LinkedIn: https://www.linkedin.com/in/stiving/ Email: [email protected]