The Reference Price Memory Flaw
Customers' memories of 'normal' prices are surprisingly poor and easily manipulated through strategic anchoring.
Explanation
People have weak memory for specific prices but strong memory for price feelings ('expensive' vs 'reasonable'). This allows strategic reshaping of reference points through consistent anchoring over time. Each price exposure updates their internal 'normal' price, making previously expensive prices feel reasonable through gradual shifts.
Real-World Example
Netflix started at $7.99, customers established that as 'cheap streaming.' Gradual increases to $8.99, $9.99, $12.99, $15.99 each became new normal. Starbucks introduced $5+ drinks slowly—customers now consider $4 'reasonable' for coffee that once cost $1.
How to Apply
Track customer reference price evolution through surveys asking 'what would you expect to pay?' Gradually shift reference points through consistent anchoring in all communications. Use seasonal or promotional pricing to establish higher anchors. Present price increases as 'returning to normal' rather than 'raising prices.'