The topic of pricing came up during a talk I gave the other day when I was asked how pricing tables should be presented on a web page. The asker wanted to know how they could display pricing options on a web page to attract the most customers. The discussion then turned to the possibility that if you give people options, they will go for the lowest price.
You certainly have various products and services available at a variety of prices. For example, if you’re in the consulting business, you may have a low-priced one-time phone call that provides basic support, all the way up to in-depth research and strategic planning at a much higher price. Likewise, if you’re selling to consumers, you’ll have various price points for different products or services: a typical shoe store, for example, will have shoes at low, medium, and high prices. The problem is that by having multiple price points, we allow people to choose low-priced items.
However, consistent research shows that price is not one of the main criteria when it comes to choosing exactly what people will buy. Sure, it’s a factor, but it’s comparatively unimportant. However, price becomes an important factor in product choice when the company focuses the customer’s mind on price. So, for example, supermarkets compete on price, always reminding us of the “fact” that they sell the lowest-priced items. When people go to your stores, they shop with price in mind, looking for a penny saved here and a penny saved there. It all adds up to reduced profitability for supermarkets. If they stopped reminding us of prices, we wouldn’t pay so much attention to them…!
At the other end of the spectrum, walk into a fancy jewelry store and try to count the prices… You’ll be there for a long time playing price tag. They don’t tell you the price because they are focusing your attention on the quality and emotional aspects of what they are selling.
However, at some point you have to tell people the price. So how can you do that without putting them off or demanding to see something that is priced much lower?
Psychological studies show that you can influence people to buy things at a higher price by displaying prices in a way that makes people want to get the most expensive items. The first step in this is to give people a choice of prices. This is seen a lot on the internet. You’ll see a table with three options and the prices for each option, as well as what you get at each price point. You also see this price option in supermarkets: a can of beans at 30p, a ‘special offer’ of two cans of beans at 59p or a pack of four cans of beans at £1.10. Many people who really just want or need a can of beans end up buying the four-pack “because it’s cheaper.” Except of course it’s not, it’s almost four times what they really need to pay…!
What you need is to display the prices so that people believe they can choose how much money to part with. But those prices must infer a higher value for higher prices. However, as I point out in my Click.ology book, you really should display your prices in the opposite way that most websites do. Most online pricing tables have the item with the lowest price on the left, the middle price in the middle, and the highest price on the right. It is more effective to have the highest price on the left and the lowest price on the right. Studies show that we perceive things on the left as smaller than similar things on the right. Therefore, the high price does not appear to be as high if it is placed on the left.
Another set of studies shows that if you give people a choice between three things, they tend to choose the middle one. If you were a courier, for example, and gave people a choice of delivery within an hour, within 12 hours, or within 24 hours, most people would choose the 12-hour window. If you’ve priced them at £10, £20 and £30, that means most people end up paying £20. All you have to do is change the prices. Changing them to £20, £30 and £40 now means that most people end up paying £30 because they choose the middle option.
So how can you stop people from choosing low prices? Easy. Offer them a pricing option and increase your prices. They will opt for the middle price, assuming you put the highest price first in the option line.