The Nature of Value

The Misunderstanding of Price
The line of thinking that equates prices with value naïvely assumes that everything is worth its current pri

havior and “default mental choice lock-in” for customers

Brands create belief systems that are designed to cause repeat be

Behavioral moats are built on a firm’s understanding of people’s psychology and underlying beliefs. Firms with these types of moats have figured out how to use advertising and branding to short-circuit rational economic thinking and leverage quick, automatic decision making. These brand-belief moats are constructed by weaving marketing into the consumption culture

s. A person can buy cheaper ice cream in a store, but stopping at “your” local Dairy Queen to eat outside with friends and family is about a shared public social ritual or event more than a retail purchasing transaction

Microsoft Office and Windows OS software are other examples of mental sunk cost moats. People spend hundreds of hours learning how to get the most from a software product

xcellent strategy and experience design contributes to successful learned behavior moat

hat repeated extra $0.50 profit per transaction becomes extra potential margin for Amazo

these instances, the cluster boundaries are determined by the perceived ease—or complication—of switching to a competing product or service. A person may be able save $0.50 on a $10.00 book purchase at a site other than Amazon.com, but registering a new account and filling out the credit card details at Bob’s Book-o-rama isn’t worth the uncertainty and hassle for most people

One way to think of these types of moats is as mental sunk cost moats, similar to economic switching cost and capital sunk cost moats described previously. Mental sunk cost moats rely on a consumer’s resistance to switching products once a choice has been made.