Pricing Strategy
Pricing strategy isn’t just about cost plus markup, or blindly aiming for the highest price possible, the very best marketers understand the psychological drivers behind consumer decision making. For those who don’t have hours to spend immersed in that subject, here is the first of 3 effective strategies to consider using in your business.
Goldilocks Pricing
Using the Goldilocks effect is a staple in marketing and involves providing customers with multiple choices with the aim of priming them to choose the middle option, which should be a sweet spot for your business.
Why does it work?
Firstly, it plays on our in-built desire to avoid extremes. Safety lies in the middle of the pack.
Secondly, when a customer is faced with a choice between 2 options, price is immediately a factor and can be easily compared between the two. But when that choice is extended to 3 options, value becomes a bigger consideration than just price. That is a good outcome in itself, but we then just have to emphasize the Best Value nature of the middle option.
Thirdly, consumers use price as a guide to quality and also to expected outcomes. So, choice 1 represents the cheap and less feature rich option, creating a suspicion of lower quality. Option 3 is the expensive and luxury option, nice to have, but not necessary. Option 2 is just right, the very best mix of value and quality.
There will be customers who choose options 1 and 3, so ensure that they are viable for you to deliver, but option 2 should be your optimal outcome.
Example
Budget haircut $25
Deluxe pampering $65
Taj Mahal body treatment $285
The offer has to be constructed to suit your target market, but in this example both the words and the price are designed to drive your target customer to your sweet spot offering.
How can you implement this strategy? Brainstorm ways that you can adjust your presentation to potential customers to include the Goldilocks Effect and don’t forget to test and measure everything so that you know what’s working.
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