Understanding the pricing strategy behind a Tk1 crore cow

This year, some cows were sold at as high as Tk1 Crore each. Photo: TBS

Picture this: it's the bustling prelude to Eid-ul-Adha in Dhaka. Amid the festive chaos and the hard-to-ignore smell, you spot a cow with a staggering price tag of Tk1 crore and a goat priced at Tk15 lakhs. 

At first, you think it's ridiculous— no one in their sane mind would pay Tk12,500 for one kilo of meat! But to your astonishment, these high-priced animals are selling fast. Your amusement quickly turns into shock and then disbelief. Why are people spending their lifelong savings on singular livestock? This isn't a luxury car or an exclusive piece of art! 

If I just summarised your Eid holidays, then read on, my dearest readers.

Understanding behavioral marketing

Behavioural marketing uses insights from psychology to influence consumer decisions. It involves understanding and leveraging psychological triggers—like biases, heuristics, and emotional responses—to create marketing strategies that resonate deeply with consumers. By analysing data on consumer behaviour, businesses can tailor their pricing strategies.

Pricing strategies aren't just about numbers; they're about perception. Behavioural marketing helps businesses understand how consumers perceive prices and make purchasing decisions. The perceived value is crucial—it's the subjective worth that a consumer assigns to a product. By enhancing this perceived value, businesses can justify higher prices and attract more buyers.

Let's find out more about some of the strategies, shall we?

Key behavioral pricing strategies

Price anchoring: When you see a cow priced at Tk1 crore next to another at Tk5 lakhs, the higher price serves as an anchor, making the 5 lakhs cow seem like a bargain. This strategy leverages the anchoring bias, where initial price exposure heavily influences subsequent price perceptions. A well-known study with real estate agents demonstrated how initial listing prices significantly influenced their valuations of identical houses.

Decoy pricing: Introducing a third, less attractive option (the decoy) can steer customers towards a higher-priced item. For example, a movie theatre might offer popcorn in small (150 Tk), medium (180 Tk), and large (200 Tk) sizes. 

The medium size acts as a decoy, making the large size appear as the best value. It makes it look so good that you almost forget the fact that you can never finish it at one go. 

This strategy is widely used in cinemas and fast food chains​. The Economist's subscription strategy is a classic example of decoy pricing. By positioning a combined print and online subscription at the same price as the print-only option, they nudge customers towards the combined subscription, increasing overall revenue.

Dynamic pricing: During peak times, demand surges. Dynamic pricing adjusts prices in real-time based on demand and consumer behaviour, maximising revenue. This ensures prices reflect current market conditions and consumer willingness to pay. 

Uber uses dynamic pricing, often raising prices during high-demand periods to match supply with demand more effectively. That's why you end up paying your entire day's pocket money on one ride when it rains.

Bundling and price framing: Bundling enhances perceived value, while price framing highlights savings and benefits, making the offer more attractive. Cable companies often bundle internet, TV, and phone services at a discounted rate, making it seem like a better deal compared to purchasing each service individually. 

Scarcity principle: Limited time offers create a sense of urgency, encouraging immediate purchases. Phrases like "Only today!" or "Limited stock!" exploit consumers' fear of missing out (FOMO), leading to quick sales spikes. This tactic has become more prevalent with the rise of e-commerce.

Social proof: People tend to follow the actions of others, especially in uncertain situations. In an experiment, individuals were more likely to choose a restaurant with a longer line, interpreting the line as a sign of better quality, illustrating the influence of social proof.

Status and prestige: High-priced purchases can signal status and prestige. Buying Panjabi from ILLIYEEN comes with assurance of good fabric quality or exclusive design, moreover, it comes with a prestige tag. 

Clever retailers often sell separate premium and more affordable (yet with high retail margin) lines in the same outlet. Thorstein Veblen's theory of conspicuous consumption suggests that people purchase expensive items to signal wealth and status, rather than for their intrinsic value.

Viral effect and social media: Younger generations often value the viral effect on social media. The guy who bought the goat for Tk12 lakhs likely did so with the intention of becoming the talk of the town, achieving instant social media fame. 

In today's digital age, the allure of going viral can drive seemingly irrational purchasing decisions. If you too fall asleep to TikTok videos like me, you probably have noticed how pistachio chocolate from Dubai is selling like crazy because it's 'cool' to eat them on camera.

Charm pricing: Ending prices in ".99" is a classic strategy. For example, a product priced at $19.99 is perceived to be significantly cheaper than one priced at $20. This is due to the left-digit effect, where consumers subconsciously round down the price. Studies have shown that charm pricing can boost sales by up to 24%. I cannot even count how many times I have added things to cart just for this alone.

​Odd-even pricing: This strategy leverages the psychological impact of odd and even numbers. Odd prices (e.g., $9.93) suggest a deal, while even prices (e.g., $20.00) imply premium quality. Luxury brands often use even pricing to enhance the perception of exclusivity​.

Removing currency signs: In some cases, removing currency symbols from prices can make them seem lower. Restaurants have found that diners spend more when prices are listed without the currency sign, as it reduces the emphasis on cost​.

Prestige pricing: Sometimes, higher prices can actually boost sales by signalling higher quality. Robert Cialdini, in his book "Influence," describes how a jewellery store doubled the price of turquoise jewellery by mistake and sold out immediately. Consumers perceived the higher price as a sign of higher quality​.

While effective, these strategies must be used ethically. Transparency and fairness are key to maintaining consumer trust. Misleading practices can damage a brand's reputation and lead to consumer backlash. 

Ethical implementation ensures long-term success and customer loyalty. For example, artificially inflating "original" prices to make discounts seem more significant ultimately erodes consumer trust and damages the retailer's reputation.

Why people actually bought them

So, why did people spend such staggering amounts on cows and goats this Eid-ul-Adha? For some, it was about social proof, and status. 

However, for the younger generation, the allure lay in achieving instant social media fame. In an age, where going viral can confer significant social currency, such purchases become more about the digital buzz than the actual product.

Next time, when you are buying something, take a pause and try to connect which pricing strategy is at play here!

Rahat Ara Kabir Kheya is a B2B Development Manager at BAT Bangladesh.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.