Transactional Utility
Why does getting a deal feel so good?
In this issue
How we cut our newsletter costs by ~$15k a year, in just a few days
Moving a newsletter usually goes like Ross moving his couch: lots of “PIVOT!” and something breaks.
Ours took a few days. Nothing broke.
We moved to beehiiv, the creator platform to write, grow, and earn from a newsletter in one place.
- Same domain, same inboxes. We switched without losing inbox placement.
- Every reader in one place. Free, paid, and all three newsletters, analyzed side by side.
- Emails that look like you designed them. Template and pasted HTML match, and lean code fits more before Gmail cuts it off.
- Lists that clean themselves. Automations handle it, no human needed.
The bottom line: ~$15k a year less, and our newsletters do more.
It was fast, too, thanks to the MCP server, which plugs AI assistants straight into your beehiiv account. What was supposed to be months of labor took only a week:
- Website design and content migration
- Newsletter templates
- Segmentation and automations
You’re supposed to pick two out of fast, cheap, and good. We got all three.
Your turn: Try beehiiv free for 14 days, no card needed, then use code SM30 for 30% off your first three months.
You walk out of the store with a jacket you didn’t need. But it was 60% off, so technically you made money. Right?
That warm glow has a name: Transactional Utility.
Nobel-winning economist Richard Thaler described it in the 1980s. He argued every purchase gives us two kinds of value.
- Acquisition utility is what the product is worth to us, minus what we paid.
- Transactional utility is the pleasure (or pain) of the deal itself, judged against the price we expected to pay.
His best-known test asked people what they’d pay for a beer on a hot beach.
If a fancy resort hotel sold it, the median answer was $2.65. If a run-down grocery store sold it, $1.50. Everything was the same, except the expected price.
Later, researchers found the good-deal feeling spills over. Shoppers who think they got a bargain also rate the product itself as better value.
You see it everywhere. The “was $120, now $59” tag that makes you forget you never wanted the shirt, or the $9 airport sandwich you grumble about, then buy anyway.
The flip side? A fair price with no deal attached can feel like a loss. Here’s how brands play it.
3 ways to leverage Transactional Utility
Don’t take the deal away
In 2012, new CEO Ron Johnson scrapped JCPenney’s endless coupons and markdowns. He called the old prices “fake” and replaced them with “Fair and Square” everyday pricing.
Many prices ended up the same or lower. But shoppers lost the thrill of the hunt, and with it, their reason to show up.
Total sales fell 24.8% that year, to $12.985 billion, and the company lost about $985 million.
Johnson admitted the pricing was a mistake. JCPenney brought back sales and coupons, which it now called “gifts” for rewards members.
Shoppers need to see a saving to feel it. If you cut prices, keep the old price in view so the deal is obvious.
Just make sure that “before” price was real, because regulators check.
Make one price legendary
Costco has sold its hot dog and soda combo for $1.50 since 1985.
Then-CEO Craig Jelinek once told co-founder Jim Sinegal the hot dog was losing money.
Sinegal’s reported reply: “If you raise the effing hot dog, I will kill you. Figure it out.”
So Costco figured it out. It built its own hot dog plants to keep costs down, and its former CFO said the price can stay at $1.50 “forever.”
Every year of inflation makes the combo feel like a better deal, because shoppers compare it to what everything else costs today.
Our take: You don’t need to discount everything. Pick one visible, frequently bought item, price it as an unbeatable deal, and protect it.
That one bargain can color how people judge the rest of your prices.
Rebuild the deal when prices drift
By 2024, McDonald’s had a value problem. By its own count, average menu prices had risen 40% in five years.
A viral report of an $18 Big Mac combo, which the company disputed, made it worse.
Its answer, launched June 25, was the $5 Meal Deal: a McDouble or McChicken, four nuggets, small fries and a small drink. The price sits right in the name.
According to M Science, about 25% of customers ordered it in the following weeks.
Of those buyers, 12% hadn’t visited in three months. Orders with the bundle also had 12% higher checks.
McDonald’s extended the deal into December.
Our take: When prices rise faster than customers expect, every visit starts to feel like a bad deal.
A clear bundle with the price up front gives them a good one to judge you by again.
So. Much. AI news. How do you know what’s worth your attention?
There’s always something new with AI, but not everything deserves your attention.
Good thing The Deep View only focuses on AI developments that could actually impact your work and decisions.
It shares must-know updates into a fun, 5-minute read and has helped 500,000+ professionals stay informed without drowning in the constant flood of updates.
Even readers from Google, Meta, Microsoft, and a16z start their day with these insights.
AI SHOPPING: Got a ChatGPT shoutout? Don’t count the sale yet. Feedvisor found 16% of shoppers start product searches in ChatGPT, but only 5% say they buy an AI pick on the spot. PartnerCentric found 33% check reviews after an AI suggestion, while just 14.8% visit the brand’s site. Your reviews still do the closing.
AI: Punishing a bot doesn’t feel like justice. Across several experiments, researchers found people see machines as capable of wrongdoing and punish them, yet feel less justice satisfaction than when punishing a human. The authors suggest holding the creators accountable instead. If your AI tool wrongs a customer, we’d have a human own the fix.
CONSUMER PSYCHOLOGY: Your biggest fans never feel full. A survey of 303 US adults found fans with stronger one-sided bonds with Taylor Swift were nearly twice as likely to try buying Eras Tour tickets. Concertgoers felt more fear of missing the concert film, not less. One great experience can sell the next one.
PACKAGING: Shoppers notice the claim, not the number. Across eight pre-registered studies, researchers found consumers rated products higher just for listing a positive attribute amount, like protein, even when the figure signaled relatively low quality. Listing a negative one hurt. So your rival’s mediocre protein number could beat your silence.
ICYMI, last time we looked at the Curiosity Gap.
The “But it was on sale” Crew
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