4 ms·
Also related is that you should aim for 3 tiers of product at 3 tiers of pricing. What will generally happen is people realise the bottom one tells the world t
by rogerbinns 15y ago
Also related is that you should aim for 3 tiers of product at 3 tiers of pricing. What will generally happen is people realise the bottom one tells the world they are cheap and skimping on product, and the top one tells the world they spend too much money and are getting too much product, so the middle one seems the right fit.
An apocryphal story about this is Wendys having 3 burgers with 1, 2 and 3 patties respectively. Not many people were buying the 3 patty version so they decided to get rid of it. The sales of the 2 patty version then declined because consumers had been using the existence of the 3 patty burger to justify purchasing the 2 patty one.
You'll notice that the iPad, iPod Touch and iPhone all come in 3 different different memory capacities. I can't find any sales figures by model, but I'll bet the middle ones are what sells the most.
This "3" approach also means you can still sell to the lower and higher end customers so you don't have to get your pricing perfect.
Edit: two additional links about this
http://www.asymco.com/2010/10/07/the-cognitive-illusion-that-is-iphone-n-1/ http://www.asymco.com/2010/10/07/the-cognitive-illusion-that... (perception of alternatives)
http://www.wiglafjournal.com/pricing/2004/07/framing-the-price-practice/ http://www.wiglafjournal.com/pricing/2004/07/framing-the-pri... ("price framing")
- citricsquid 15y agoDo you think this theory also applies to 1 month, 3 month or 12 month subscription options to services?
- rogerbinns 15y agoIt applies whenever you are spending money - you consider the alternatives, but humans do not do so rationally. By how you frame your 3 options, you can push people to buy the one you want. Here is an other example from Dan Ariely, a behavioral economist, showing three options: http://danariely.com/the-books/excerpted-from-chapter-1-%E2%80%93-the-truth-about-relativity-2/ http://danariely.com/the-books/excerpted-from-chapter-1-%E2%...
- jbrennan 15y agoWarning: On-Swipe link.
- eli 15y agoMan, I wouldn't believe you if I hadn't seen this first hand. Offer a Silver, Gold and Platinum package and people overwhelmingly choose Gold.
- jdietrich 15y agoBy similar principle, the second-cheapest bottle of wine in a restaurant is invariably the biggest seller. Nobody wants to be a cheapskate, but few customers actually know what kind of wine they want or how much they should spend. Restaurateurs know this, which is why it invariably carries a disproportionately high mark-up.
- BryanB55 15y agoI wonder how this would work for 4 categories instead of 3? When looking at something like backpackit.com, I really like how their packages feel like there are more options to get in at different price points.