Ever found yourself in a situation of not being sure how many price points to offer in a particular product category? Or perhaps you are selling more of your entry level product in a certain category than you would like. If either of these are the case with you, then this column will help.
Marketers have known for decades that packaging information in groups of three makes it easier for consumers to remember the choices and make decisions on what is best for them. Why three choices, and not two…or four for that matter. The answer lies in human psyche. Our brains have evolved in a way to protect us from harm and make decisions easier to make. We know that if we do not have any choices when trying to get out of a dangerous situation it could have grave consequences for us. Conversely, if we have too many choices, confusion sets in. Our brain likes to have choices, but not too many choices.
Tapping into Three
To tap into this protection mechanism in the human brain, marketers and salespeople should recognize the power of three that is built into almost everything. When listing items in numeric order, the English language assigns greater importance to the first three by giving them unique endings – 1st, 2nd, and 3rd. The numbers that follow all have the same ending – 4th, 5th, 6th, 7th, etc. The Olympics were recently held, and they only award the first three winners of each event a Gold, Silver and Bronze medal. In most contests, people stop counting after third place. The human brain either does not care or does not remember who is beyond third.
An experienced photographer tries to place the horizon line of their photograph one-third from the top or one-third from the bottom and not in the middle, where amateurs often place it. If we consider color, it is no surprise that there are three primary colors – red, yellow, and blue. And, in music, the third note of every scale provides the tone and harmony that human ears find pleasing.
In terms of product marketing, or entertainment, let me ask a question that nearly every person will know the answer to – how many Stooges were there? Musketeers? Or elves on a Rice Krispies box? That is right, three! The human brain’s attraction to groupings of three is very powerful.
Three Price Options
There is research that suggests offering three price points in your overall offering can lead to more sales, and a higher average sale price. When given three price options, consumers will pick the middle one a high percentage of times, and there are psychological reasons for that as well. One of those is the Center-Stage Effect. In 2011, Dr. Paul Rodway conducted an experiment that determined when given multiple options, humans will most often choose one near the middle. They do not want the cheap version, nor do they want to spend too much for the luxury version, so they opt for the middle version. This implies that positioning and price play a role in the purchasing decision, but that is not always the case. For example, consider gas stations. Most gas stations provide three options for gas. To coerce buyers to purchase premium gas, some pumps place this more expensive option in the middle. I fell for that trick once…but learned not to do that again.
If you have multiple options for a given product, put the option that you want to sell more of, in the middle. You can increase the power of the middle option by listing it as the “Most Popular” choice. This is known as the “Bandwagon Effect”. If other people are doing it, then it must be right. Humans are programmed to think and behave in this way.
For those of you stuck in the rut of selling your lowest priced products but seeking to give your customers a better product and make a little more money for yourself in the process, try offering three product packages that step up in value to the customer and purchase price. The odds are strong they will choose the middle product and do the upselling for you.
