In my lunch break today I worked on a Marketing Seminar (TMS) assignment about pricing as a marketing tool; the price you charge needs to match the marketing that you do for that product.
The material reminded me of a section in Dan Ariely’s book Predictably Irrational where he explains how companies can guide us to particular choices by adding options that are easy to compare.
His example is for an Economist subscription, with the following options:
- Online access $59
- Print subscription $125
- Print & web subscription $125
Would you choose the middle option?
In the video below (at 12:30) you’ll see that having the dummy option in the middle dramatically increased the number of people who picked print & web.
In the TMS assignment Seth mentions that a really easy way to increase the average price a restaurant customer pays for a bottle of wine is to put an expensive bottle on the menu; if you’re the kind of person who doesn’t buy the cheapest or the most expensive then you’ll probably buy somewhere in the middle. So adding an expensive bottle raises the comparative amount that you’re prepared to spend.
A while ago I attended a Lean Startup programme with Salim Virani and Rob Fitzpatrick and they mentioned a startup had used this comparative pricing tactic. It was found to be really effective in influencing the choices customers made and the results were considered commercially sensitive.
Being aware of our psychology helps us to recognise this phenomenon when we see it.
And if you choose to use it in your business, please do so for the right reasons.