Tuesday, September 11, 2012

Relative Perception

The negative consequences of change, the downward spike, are relative to size or even the perception of the size of the change.  There are indications that the reaction to change is practically nil below a level of 10%.  For example a change in color, audio volume, or brightness of lights less than 10% will go virtually unnoticed, and thus there would be no reaction to it.

 
To illustrate Relative Perception consider a frequent example related to the purchase of a new car.  Let’s say you’re looking at a $40,000 car.  The salesperson suggests you upgrade the standard radio to their deluxe model.  The new price is $40,350 and the increase in the monthly payment is only pocket change.  It is an easy decision—a no-brainer.  You opt for the upgrade.

However what if you were just purchasing the radio with no car involved.  The price difference would look entirely different to you.  The standard radio model is $225.  The upgraded model is $575.  The relative change or difference in price appears large, and your reaction to that change would be quite different—the decision to upgrade would not be so inviting.




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