What’s your ‘magic middle’ pricing?
Expensive…. Compared to What?
As consumers, price anchors help us judge something’s value relative to its cost.
To know whether an item is expensive, we look for comparisons. A $25 item might trigger a different reaction depending on whether it’s the highest, lowest, or middle option available.
You might not trust the product if it’s the cheapest option available, and you might assume you don’t need to spend that much if it’s got the highest price tag. But you’ll naturally gravitate toward it if it’s in the middle of the range – it feels like the safe choice.
In restaurants, this ‘magic middle’ mentality helps determine menu pricing. The restaurant knows the majority of their guests won’t order the most expensive entrée or bottle of wine, but they can use those prices as anchors to create demand for other options. For example, if their entrees range from $20-40, maybe 15% of patrons will order the $35 plate. But if a $50 option is added, the demand for the $35 meal will increase.
Anchored against $50, $35 sounds much more affordable.
Just like that restaurant, a professional service firm doing B2B sales could consider adding a higher ticket option to make the previously most expensive choice seem safer.
Shifting Demand
As buyers, we naturally look for comparisons against other options. That’s why adding products or services at the top of the range can push your average sale value higher… even if no one ever buys them.
Looking at your product ladder, what would happen if you added a new highest priced product or service? Is it possible demand would increase for your current top shelf offer?
What would happen if you added a new lowest priced item. Could you increase sales for your previously least expensive solution?
This Week’s Takeaway
Your customers compare each solution you offer to evaluate which one has the most value relative to cost. The set of options you have available in your product ladder can have a big impact on their buying decision.
What’s the most expensive solution you offer your customers now, and how many choose it? If you were to add another option that cost 20% more, might it become even more appealing to your ideal clients?
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