Not everything that can be counted counts!

The Veblen Effect

Not everything that can be counted counts, and not everything that counts can be counted!

– Albert Einstein

We often think that expensive things are better.

I am sure you too would have been of that opinion.

Luxury items, fancy brands, and exclusive services have high prices, making us believe they are superior.

But is this always true?

Does expensive always mean better quality?

There is an interesting psychology behind pricing and its perceived value.

I came across this nice little story a few months back.

It is a fascinating story from history and shows how some brands are able to demand more money without really adding anything extra in terms of value.

Julius Caesar and the Veblen Effect!

In 75 BCE, Caesar was captured by a group of Cilician pirates in the Aegean Sea as he was on his way to Rhodes to study oratory there under Apollonios.

He was 23, then!

From the point of capture, Caesar never behaved like a captive!

The pirates told him that they had set his ransom at the sum of 20 talents of silver which is about 620 kilograms of silver.

He laughed at them for being ignorant of who it was that they had captured and his worth.

He insisted that the ransom must be raised to 50 talents of silver.

The pirates were initially confused.

But they thought, “if the captive himself wants to raise the ransom, why not demand the same”.

After all it was in their benefit.

So they demanded 50 talents of Silver!

Caesar immediately sent his entourage to collect the ransom.

Meanwhile Caesar was having a nice time with the pirates behaving as though he was their commander, making them listen to his speeches and poems!

The high amount of ransom demanded by the pirates suddenly made Caesar famous in Rome.

The Romans assumed he was special and a very important person.

Caesar has placed a value on himself, much greater than anyone else in Rome!

Because of the high perceived value and importance, collecting the ransom was not difficult.

The exorbitant amount of ransom also put Caesar on the political map of Rome.

The ransom was finally delivered 38 days later and Caesar released!

Caesar created a “Veblen Brand” out of himself and sold himself to the Romans and a very important person, finally becoming the ruler of Rome.

People tend to spend money on things that are highly priced, perceiving it as –

• High quality
• Luxurious
• Premium

The psychology – reality originates in the mind. Create a perception, Control the Context, Control the mind!

Caesar’s elevation to fame was not solely because of the Veblen effect.

While the Veblen effect triggered it, it was his confidence and intelligence that helped him become the glorious ruler of Rome!

The Veblen Effect

The Veblen Effect, named after economist Thorstein Veblen, explains why people think high-priced items are better just because they are expensive.

This effect is clear in luxury markets, where the price itself adds to the product’s appeal.

From Caesar to Cartier, the psychology has stayed the same.

Brands like Rolex, Bentley, and Apple use this idea well.

Their products are known not just for their function but also for the prestige their prices suggest.

These brands know that for some people, paying a high price is a status symbol, showing exclusivity and desirability.

But does paying more always mean getting better quality?

The simple answer is no.

Luxury brands do offer great craftsmanship and innovation, but many times, cheaper alternatives are just as good or even better.

The higher price is often more about perceived value than actual quality.

Take online courses, for example. It’s easy to think that a course priced at $1,000 must be better than one priced at $100. However, this isn’t always true.

Many affordable courses and tools offer excellent quality and content, often surpassing the higher-priced ones.

So, why do we believe in the Veblen Effect? Here are a few reasons:

1. Status Symbol: Higher prices are linked to social status. Owning expensive items can show wealth and success.
2. Perceived Premium-ness: We think higher prices mean better materials, superior craftsmanship, and top performance.
3. Exclusivity and Desirability: High prices create a sense of rarity and exclusivity, making the product more desirable.

Here’s how understanding the “Veblen Effect” can help you –

If you are selling a product/service:

• Price optimally – You might have an amazing product/service/course. But if you are not pricing it optimally, you might just be driving away your prospective customers..

Ask questions to understand who your ideal audience is.

• Are they luxury shoppers or, necessity shoppers?
• What part of their journey are they in?
• What could be their spending power?

Each of these segments will have a different requirement.

Depending upon who your products/services are targeting and what change it can bring about in them, price accordingly!

If you are buying a product/service:

• Spend optimally – All pricey products/services need not be top quality and all affordable ones need not be low quality.

On the internet, there are only so many tips, tricks, techniques.

There are no magic wands or, magic tricks that can catapult you from the 100th position to the 1st position. If anybody is promising you that, then it is a RED FLAG!

If it is a product/service that you are buying:

• Ask yourself if you really need all the features.
• What incremental benefit can the additional feature give you?

Compare the essential features to the price and decide if it is something you should go for.

If it is a course that you are buying:

• Check how good, credible and experienced the creator is.
• Assess what exactly the course is covering
• Do a price to offering comparison and pick the one that is priced optimally..

This is especially important if you are starting off. Remember –

• Spend optimally
• Pick must-haves against good-to-haves

If you are starting off on the internet with your podcast, blog or, anything there here are a few products and services that I have handpicked for you..

Here are 5 of my favorites –

Courses:

LinkedIn OS from Justin Welsh – Priced extremely affordable but amazing quality. Check it out here!

Tools:

Meetings and Appointment Booking tools – Tidycal, from the folks at Appsumo. Affordable with immense value in terms of features – Check it out here!

Autoresponder – BirdSend, my new found love from Welly Mulia.. Amazing deliverability, with all of the bells and whistles that you find in other providers including automations. Check it out here!

WordPress themes:

Generatepress, the easiest and most affordable theme with powerful features. Check it out here!

WordPress Business Suite:

Thrive suite, that includes optin form builder, theme builder, landing page builder, testimonial catcher and display, automation builder (like Zapier), Membership site builder, landing page A/B testing, and more. Check it out here!

Over to You!

Remember, the true value of a product is in how well it meets your needs and expectations, not just its price.

While luxury items can offer a sense of exclusivity and prestige, they don’t always guarantee better quality.

Making informed decisions based on research and personal needs will ensure you get the best value for your money.

The Veblen Effect can make us believe that pricier means better. However, by focusing on the actual value a product offers, we can make smarter, more cost-effective choices.

So, the next time you’re tempted by a high price tag, ask yourself: is it truly worth it, or is it just the allure of the Veblen Effect?

Stay smart, and remember – value is what you get, not what you pay.

I put in about 18 hours every month to create this newsletter, starting from researching to writing and editing it.

So, If you enjoyed reading this Newsletter, I would sincerely appreciate it if you could recommend it to others. You can send them to https://theloudspeakeronline.com to subscribe to it for FREE!

What am I reading?

The Unfair Advantage by Ash Ali and Hasan Kubba, is an ultimate read.

I am almost about to finish it..

This book is an eye-opener for every one of us who have always felt that the successful people out there have had an unfair advantage.

Here what it covers (Synopsis):

It explores the concept that everyone has unique strengths and opportunities that can be leveraged to achieve success.

It also challenges the traditional notion of meritocracy and emphasizes that external factors such as upbringing, location, and personal connections play a significant role in one’s success.

Key points covered in the book include:

1. Unpacking the Unfair Advantage: Explanation of how it differentiates from skills or hard work alone. The book argues that everyone has some form of unfair advantage that can be harnessed for success.
2. MILES Framework: It presents the MILES framework, which stands for Money, Intelligence, Location, Education, and Status. This framework helps readers identify their own unfair advantages by evaluating these five key areas.
3. Personal Stories and Examples: Real life stories to illustrate how recognizing and utilizing unfair advantages can lead to success. They highlight real-life examples to show how different advantages have been leveraged.
4. Actionable Insights: You get some very practical advice on how to identify and maximize one’s unfair advantages, offering tools and exercises to help readers apply these concepts to their own lives and careers.
5. Changing Perspectives on Success: The book primarily aims to shift your perspective on what it means to be successful and encourages them to focus on their unique strengths rather than comparing themselves to others.

I would recommend picking this book up as your next read.

Go ahead and check it out!

The Last week on the Podcast

I had taken a break for about 4 weeks from the podcast.

The latest episode was released last week and it was a continuation of the discussion that we started last month – list building.

List building is an integral part of monetizing any form of content – podcasts, blogs or, even newsletters.

And if you are into any of the above and not building your list, then you are doing a crime..

Here are the links to the latest episodes:

Episode – 142: Top Email Marketing Tools that Every Podcaster should use!

Episode – 143: 9 Common Email Marketing Mistakes that Podcasters should avoid!

That’s it for this week!

Do let me know your thoughts, feedback, and opinions about this newsletter.

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If you are comfortable writing a review for the newsletter, you can do that here. Your support would be sincerely appreciated.