Why do some founders charge 10x and get it?

Same market. Same service. Wildly different prices.

The difference isn't their offer. It's their certainty.

The theory

And certainty comes from alignment. When how you look matches what you deliver, you stop questioning your worth.

They don't charge more because they're better. They charge more because they believe it. And belief is contagious.

That's my theory, anyway. I wanted to know if it holds up anywhere outside my own head, so I went through the research on how a price tag and a first impression change what people will pay, and who they believe.

The price tag changes the taste

In a 2008 study, a team from Caltech and Stanford put 20 people in a brain scanner and had them sip wine. They were told it was five different Cabernets, each one labeled with its price. There were only three wines. One of them showed up once as a $5 bottle and once as a $45 bottle. Another showed up at $10 and again at $90, which was its real retail price.

People rated the same wine as more pleasant when it carried the bigger price, and the scans agreed with them. An area of the brain tied to how much you're enjoying something was more active at the higher price. In a follow-up eight weeks later, the wines were served with no prices at all, and the ratings came out even.

Pills work the same way. In a study published in JAMA, 82 people got light electric shocks to the wrist before and after taking what a brochure called a newly approved painkiller. Every pill was the same placebo. Half the brochures said it cost $2.50 a dose, and the other half said it had been marked down to 10 cents.

An earlier study by some of the same researchers found the same thing with an energy drink. People who paid a discount price solved fewer puzzles afterward than people who paid full price for the same drink.

One placebo, two prices

Share who reported less pain after taking it

$2.50 a dose 85% 10 cents a dose 61%

Waber, Shiv, Carmon and Ariely, JAMA, 2008, as reported by Duke University

See the numbers
Price on the brochureReported less pain
$2.50 a dose85%
10 cents a dose61%

In a 2006 paper, a team at Carleton University flashed website homepages on a screen for 50 milliseconds and had people rate how appealing each one looked. Another group saw the same pages for half a second. The average ratings from the two groups matched almost perfectly, a correlation of .947 where 1 is a perfect match. The researchers put their takeaway right in the title: "Attention web designers: You have 50 milliseconds to make a good first impression!"

Faces get the same treatment. At Princeton, Janine Willis and Alexander Todorov showed people photos of strangers for a tenth of a second and asked yes or no questions like "Is this person competent?" Those snap calls lined up with what a separate group decided with no time limit at all, and trustworthiness lined up best. Giving people a full second didn't make the calls line up any better in a way the stats could detect. The authors' read is that "additional time may simply boost confidence in judgments."

I think that's the part that matters for pricing. The first read happens that fast, and more time mostly makes people surer of it. So when what people see first matches what they get later, all that extra time works for you.

Snap calls against calls with no time limit

How closely they agreed, by trait. 1 would be a perfect match.

  • A tenth of a second
  • A full second
Trustworthiness .73 Attractiveness .69 Likeability .59 Competence .52 Aggressiveness .52

Willis and Todorov, Psychological Science, 2006, Table 1. Values on the right are at 100 milliseconds.

See the numbers
Trait100 ms500 ms1,000 ms
Trustworthiness.73.66.74
Attractiveness.69.57.66
Likeability.59.57.63
Competence.52.67.59
Aggressiveness.52.56.59

Certainty has to match the work

This one puts a condition on my theory, and I think it's the most useful study of the bunch. A team of psychologists had 103 college students act as jurors and read two witness accounts of a car accident. Both witnesses were sure about the crash itself. One was also sure about everything else. The other admitted she was hazy on the small stuff, like what she'd been doing earlier that day.

At first, 75.5% sided with the witness who was sure about everything. So far, belief is contagious. Then the jurors learned both witnesses had one small detail wrong, each off by a week on an appointment. The witness who was sure about everything dropped from 4.5 to 2.8 on a six point credibility scale. The other dropped from 3.7 to 3.0, and now 58.4% sided with her.

The paper is called "Calibration Trumps Confidence as a Basis for Witness Credibility." People trusted the witness whose confidence matched what turned out to be true. That's the alignment thing I was getting at. Confidence moves people, and it keeps moving them as long as the stuff they can check holds up.

Credibility before and after one small mistake

Average rating on a scale of 1 (not credible) to 6 (credible)

  • Sure about everything
  • Unsure of the small stuff

Tenney, MacCoun, Spellman and Hastie, Psychological Science, 2007, Experiment 2

See the numbers
WitnessBeforeAfter the slip
Sure about everything4.52.8
Unsure of the small stuff3.73.0

The asterisk

These are lab studies, and mostly small ones: 20 wine drinkers, 82 people getting zapped on the wrist, 40 people rating homepages, 103 students playing jury. Nobody in them was hiring a founder, and none of them measured what anyone charges for a service. The wine effect also needed the price in front of people. When the price tag came off, the difference went with it.

So there's no study here that says certainty gets you 10x. I'd still bet on the pieces. Price and presentation shape what people experience, and confidence earns trust for as long as the work matches it.

Or maybe I'm wrong and it's just better funnels. Tell me.

Sources