Fraud as a Price Augmentation Device

Tuesday, November 24, 2015

I wrote a semi-satirical guide to self-promotion a while ago. It was entitled The Scumbag's Guide to Content Marketing. As you can probably guess, it describes a number of techniques that morally questionable authors can use to increase the perceived value of their wares. After all, the higher the perceived value of an item, the more customers will be willing to pay for it.

One of my tips involved a method to trick visitors into believing that a given site had been viewed positively by the press. It involved adding an "as featured in" section at the bottom of the author's website along with the logos of some famous newspapers. Key to the success of this act is to never allow readers to see how the business was featured or described by the external websites.

In this way, a firm can literally make whatever claims it wants, even if there is little in the way of factual evidence to back its statements up. Words can be twisted, meanings altered.

Let's look at a claim that I could make:

The pope mentions my name often, and I counseled him with pricing advice prior to his first trip to America.

Sounds like quite an endorsement right? Of course, the truth isn't quite so rosy.

My name is Adam, a commonality I share with the first human mentioned in the Old Testament. Oh, and though I wrote an open letter to the pope regarding a pricing strategy selected by his staff, I doubt that he has ever visited my site. [Note to Pope Francis: Please correct me if I'm wrong.]

Because websites rarely provide evidence to prove their claims, and few visitors bother to investigate them, firms feel free to imply just about anything. In fact, I've seen folks make some pretty ridiculous claims. I often mention the consultant I know who describes himself as the author of two books. The truth is that he has written zero books. However, because two manuscripts are "in progress," he feels that his statements are entirely justified.

I've spent hours researching "as featured in" claims on websites and almost universally fail to find anything to support their dubious claims.

Now we find ourselves in a metaphorical arms race. Businesses are forced to make bigger and bigger claims in order to compete with each other. If this trend continues, we might get to the point where all honest businesses are driven out of the market and all advertising will consist of misleading statements (The Market for Lemons).

I'll never deny the power of economic signaling, but I do think that it is often unwise to significantly overstate the value of a given product. We've seen how even tiny inaccuracies have the potential to spiral out of control and cause enormous damage to reputations. Unfortunately, while we wait for "inaccuracies" to be noticed by the majority, they provide an advantage to those who use them and hurt those who attempt to compete using more honest forms of advertising.

The solution? Target customers who look for actual (rather than perceived value), and train those who don't know the difference. As the famous businessman Sy Sims used to say, an educated customer is our best customer. It's often simpler to ignore those who can be easily fooled and to concentrate one's messaging on the most discerning of customers.

Enjoyed this article? Why not read my book on software pricing? It has been featured in a number of respectable journals!