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Friday, October 31, 2014

The $2 Chicken Rice Story

I chanced upon a stall that sells chicken rice for $2 and saw many people queueing for it. Knowing what to expect but curious, I went to purchase them for lunch. Not too far away from the stall, there is another chicken rice stall that sells for $4.

The $2 chicken rice was packed with lots of rice and 3 thin piece of the chicken. Not that I am complaining, but I ended up finishing the chicken with my rice still more than half left.


Here, I am not going to talk about the capacity to eat nor greed versus need.

What I am going to talk about in this story is the concept that has been used by many marketing experts out there that take advantage of humane's predictably irrational mind.

Based on the book Predictably Irrational by Dan Ariely, human nature tends to define value on a relative basis rather than absolute basis when it comes to purchasing. Take the chicken rice example I mentioned, the $4 chicken rice would have given more than double the meat the $2 chicken rice meal had offered. But people choose to purchase the one with the lower cost instead, buying multiple packets since it was more affordable.

Take another example for instance, you go to a restaurant by the Collyer Quay and had this in their menu:

Wagyu Beef with salted peas and mashed potatoes - $48
Chicken Rice Speciality - $12

All of a sudden, the chicken rice become such affordable to you. I know some are probably going to argue the intangible such as service and ambience but how many times are you caught with such situation and still choose to do so. The book leverage on compelling human mind explanations to show that a highly effective technique to pricing is to put another product at a higher price next to it. This plays around our mind the sense of relative value.

Perhaps this is why many Singaporeans are one unhappy bunch despite earnings multiple times the income of the neighbouring countries. Look left, look right, how to be happy with $100k/annum when your neighbour is earning $150k/annum.

This should remind us about a quote from Theodore Roosevelt:

"Comparison is the Thief of an Ultimate Joy"

Being rich in life is not about looking left or right, look at your own hands and self in the mirror, that's happiness.

20 comments:

  1. Hi B,

    Excellent book, one of the best I've read this year. If you're interested in more, you can read Influence: The psychology of persuasion by Robert B. Cialdini - another must read in the field of behavioural psychology.

    ReplyDelete
    Replies
    1. Thanks a lot LP!!!

      Im kind of into behavioral pshychology these days wanting to disect how human minds work.

      Youve read plenty of books. I will refer you as my library helpdesk from now on if you dont mind.

      Delete
  2. Hi B,

    Relative valuation is rampant in our everyday life. The amusing thing is that sometimes we associate quality with price.

    E.g. some people prefer $100+ branded shirts when a $15+ shirt from the supermarket looks almost the same. The justification is higher quality.

    Bring that back to investments. Just because a stock is trading at an expensive premium doesn't mean it is higher quality. :p

    ReplyDelete
    Replies
    1. Hi SRSI

      Ahh in investment, people are frying the penny stocks. After all I heard someone said that 10 lots of golden agri is better than 2 lots of wilmar. Or jardine is the ultimate cos its priced out of reach at 50+ hehehe

      Delete
  3. Same as stocks. Some blue chips are "expensive" as they cost more than $10 bucks.

    ReplyDelete
    Replies
    1. Hi Uncle CW

      Yeah "expensive" whch is why sgx is lowering the number of lots. From jan 15 the playing field would be equal hehe

      Delete
  4. B,

    Bingo!

    What we have here is people earning hundred of thousands a year being sore at those who earn millions a year.

    Especially if that person earning more has attended the same schools, attained the same qualifications, have similar family backgrounds as you.

    All the spiritual sermons and classes attended go out the window when envy rears its ugly head...

    ReplyDelete
    Replies
    1. Hi SMOL

      People jealous people sore.

      In a game there can only be one winner mentality the rest are sore losers. Only inside the mind can we hv all winners game. Ahh the beauty of such.

      Delete
  5. Influence is indeed a good book. I read it and now am more careful and wary around salespeople, haha!

    If we stop comparing, we'd all be much happier! Tough to achieve though....

    ReplyDelete
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    1. Hi MW

      Im going to read that book recommended by LP. Looks like you give it a thumbs up as well.

      Its inevitable in a place like singapore where productivity is so high coming from all comparisons like these. If everyone is so laid back maybe we would not hv thr Singapore we had today.

      Delete
  6. Some need to eat more rice so $2 chicken rice is good fit.

    Stall owner likes buyers who said "Less rice!".

    No waste food.




    ReplyDelete
    Replies
    1. Hi Uncle CW

      Those who needs more energy rice is a good and viable option cos its cheap.

      Ive seen many construction workers who eats plenty of rice with less meat and vegetables. Can eat a lot and cheap!!!

      Delete
  7. I also read "The (Honest) Truth About Dishonesty" by Dan Ariely recently, very refreshing read.

    ReplyDelete
    Replies
    1. Hi Richard

      Looks like you are another bookworm and im adding you to my library helpdesk if I need to find a book I kno where to go :)

      Delete
  8. Hi B,

    It's about "relative" - Einstein theory of relativity is by far the most powerful. See..

    In work or life, healthy competition is sometimes necessary. But over indulge in it makes people unhappy! But we were brought up in a society as such. The most difficult is to "compete against yourself" which requires "special drives among you" - most of the time passion!

    A more practical question "where is the stall?" So is the $2 one nicer than the $4 ones?

    Will you queue again for the $2 chicken rice?

    Rolf

    ReplyDelete
    Replies
    1. Hi Rolf

      You hit the nail there.

      Society is not going to lose any of this. It is up to the individual to do what he is supposed to do.

      I am only human and will grace to make the same mistake like anybody else.

      Delete
  9. I will take the $2 chicken rice in most circumstances. Usually meals are just eaten to keep me going. Beyond a certain quality, price will be the most important consideration. Quality will only get you so far

    Michael

    ReplyDelete
    Replies
    1. Hi Michael

      Ahh this one is for the needs so anything to get you full will do enough for you. I used to do that in the past but tends to enjoy quality over quantity these days.

      Delete
  10. Hi B,

    The Mandarin Hotel chicken rice does taste diff than the $2 chicken rice. Once a while must go for quality. Haha.

    Farmer.

    ReplyDelete
  11. The older I get, the more money I have, the more simply I live. It's quite an irony. I blame it on too much consumerism in Singapore. With all the big shopping malls, 24 hour non-stop commercials, it is hard not to get caught up with wanting more. Only when we get a chance to see and experience poverty, are we more mindful of the value of money.

    Renewed investor

    ReplyDelete

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