Offering 3 options to customers. Good idea?

13 replies
Hi;

I was watching victor Antonio upselling video and he says offer 3 prices.

I'd never heard that one. Is this a good set up for selling on the internet as well? Or it doesnt really apply to online selling?
#customers #good #idea #offering #options
  • Profile picture of the author Jeff Burritt
    Banned
    Typically people pick the one in the middle. So make that one your feature 'best value.'
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  • Profile picture of the author John Pagulayan
    It does apply.

    Here's how to get the most bang out of your offer.

    Let me give you an example:

    Say you're promoting an seo service:

    Offer 1: Rank 3 keywords to first page guaranteed for $997
    Offer 2: Rank 6 keywords to first page guaranteed for $1,397
    Offer 3: Rank 12 keywords to first page guaranteed for $1,497

    Which would you choose?

    Chances are, if you're on a budget you'll get the first offer.

    If you have the money though, you'd get the 3rd offer.

    The second offer is called a dummy offer. It's only there to make the 3rd offer more viable.

    This has been a proven marketing tactic and if you're around packages you've probably seen this at work.
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    • Profile picture of the author Frank Donovan
      Originally Posted by John Pagulayan View Post

      The second offer is called a dummy offer. It's only there to make the 3rd offer more viable.
      It's called the decoy effect, and it's used to increase conversions of the highest priced option.

      In Predictably Irrational, Dan Ariely relates the example of The Economist magazine which employed the tactic of having three pricing structures for its annual subscription. The first was a digital only version at $59, the second was a print version at $125 - and the third was a print and digital combo also at $125. They found that the majority of all prospects exposed to the offer chose the combo option (at $125), yet when the offer was changed to include just two choices, the $59 digital and the $125 combo, most prospects opted for the cheaper $59 choice. The apparently bad value "decoy offer" in the three-price version had encouraged a much greater take-up of the higher-priced option amongst all prospects.

      Another reason for an extra price option is that people are famously rubbish at making decisions about value. They need "reference prices" as a comparison. This is particularly so if the product or service isn't a regularly purchased item.

      That's why the "reduced from" tactic is so widely used, and it's one reason why many product launches start out with an artificially high price as a means to "reference" the price in the minds of the prospects against which subsequent offers will appear good value.


      Frank
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      • Profile picture of the author Steve B
        Originally Posted by Frank Donovan View Post

        Another reason for an extra price option is that people are famously rubbish at making decisions about value. They need "reference prices" as a comparison. This is particularly so if the product or service isn't a regularly purchased item.

        That's why the "reduced from" tactic is so widely used, and it's one reason why many product launches start out with an artificially high price as a means to "reference" the price in the minds of the prospects against which subsequent offers will appear good value.


        Frank, you are right . . . and unfortunately a lot of guru marketers have carried this reference point pricing to the ridiculous! How many times do you see a marketer claiming his package has a value of $4995 . . . but . . .

        out of the goodness of his heart, and to give back to the IM community, he's not going to charge you that much . . . no he's your friend . . . it's not going to be even half of $4995 . . . and it's not going to be . . .

        $1995 or $1595 or even $995!

        He could sell these all day long at $795 but he wants everyone to be able to afford the package, so it's not even going to be $595,

        or $395,

        or $195, . . . wait, hold on to your hat . . .

        My accountant told me I was crazy, but . . .

        I'm not going to sell it for $95 or even $49.95 . . .

        I'm going to do something that's never ever been done before!

        For the next 24 hours, or until they run out, you can get my $4995 package for a one time price of just $7!!! OMG!!!

        Steve
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        Steve Browne, online business strategies, tips, guidance, and resources
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        • Profile picture of the author Frank Donovan
          Originally Posted by Steve B View Post

          Frank, you are right . . . and unfortunately a lot of guru marketers have carried this reference point pricing to the ridiculous! How many times do you see a marketer claiming his package has a value of $4995 . . . but . . .
          <snip>
          For the next 24 hours, or until they run out, you can get my $4995 package for a one time price of just $7!!! OMG!!!
          Yep . Most "value" prices I've seen quoted in marketing offers are laughable. For reference pricing to be effective, the examples need to be credible.

          .
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          • Profile picture of the author a2hosting
            For our product, over the years we have at sometime offered a single package, two packages and three packages. Inevitably our sales perform better when we offer three packages. As much as offering a single, one-sized fits all option seems like it would perform the best from a simplicity standpoint, you miss out on a lot of upsell opportunities going that route.
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        • Profile picture of the author KenJ
          Originally Posted by Steve B View Post

          Frank, you are right . . . and unfortunately a lot of guru marketers have carried this reference point pricing to the ridiculous! How many times do you see a marketer claiming his package has a value of $4995 . . . but . . .

          out of the goodness of his heart, and to give back to the IM community, he's not going to charge you that much . . . no he's your friend . . . it's not going to be even half of $4995 . . . and it's not going to be . . .

          $1995 or $1595 or even $995!

          He could sell these all day long at $795 but he wants everyone to be able to afford the package, so it's not even going to be $595,

          or $395,

          or $195, . . . wait, hold on to your hat . . .

          My accountant told me I was crazy, but . . .

          I'm not going to sell it for $95 or even $49.95 . . .

          I'm going to do something that's never ever been done before!

          For the next 24 hours, or until they run out, you can get my $4995 package for a one time price of just $7!!! OMG!!!

          Steve
          Had to smile at this - Well said. I'm so glad someone else thinks like me!

          KenJ
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      • Profile picture of the author Winning34
        Originally Posted by Frank Donovan View Post

        It's called the decoy effect, and it's used to increase conversions of the highest priced option.

        In Predictably Irrational, Dan Ariely relates the example of The Economist magazine which employed the tactic of having three pricing structures for its annual subscription. The first was a digital only version at $59, the second was a print version at $125 - and the third was a print and digital combo also at $125. They found that the majority of all prospects exposed to the offer chose the combo option (at $125), yet when the offer was changed to include just two choices, the $59 digital and the $125 combo, most prospects opted for the cheaper $59 choice. The apparently bad value "decoy offer" in the three-price version had encouraged a much greater take-up of the higher-priced option amongst all prospects.

        Another reason for an extra price option is that people are famously rubbish at making decisions about value. They need "reference prices" as a comparison. This is particularly so if the product or service isn't a regularly purchased item.

        That's why the "reduced from" tactic is so widely used, and it's one reason why many product launches start out with an artificially high price as a means to "reference" the price in the minds of the prospects against which subsequent offers will appear good value.


        Frank
        Nice post. I think the psychology of selling is fascinating. As a consumer, even when I can see that the seller is using the "decoy effect", it's very hard to resist it. I guess that's proof in itself of how powerful it is.

        I was looking at a few PLR membership sites recently. I can't remember the exact figures, but it was something like: monthly membership: $30, yearly membership: $120 and lifetime membership: $130

        Like I said, those weren't the actual numbers, but you get the idea
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  • Profile picture of the author Slade556
    It's a good strategy and it applies to online sales as well, why wouldn't it?
    I don't know what statistics say about what offer do people pick, but offering more choices to pick from will probably help.
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  • Profile picture of the author Mark Singletary
    Depends on the situation such as your target market, what you are selling, etc.

    Amazon, Home Depot, and Walmart, for example, don't use this tactic either online or off. They have addons or upsells sometimes but not 3 different "packages" typically for a box of nails or a software program or a refrigerator.

    Mark
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    • Profile picture of the author discrat
      I think it could be a good strategy. No question. Just depends what exactly your are selling and to whom..

      Charging more and for a lower cost per unit is something that seems to attract people to



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  • Profile picture of the author AdamJ85
    I agree with John.

    Having three prices can be a great tactic. It can be used to make the lowest price seem cheap and to push people who can afford it towards the more expensive option.

    The only thing I'd add is that it's very important not to confuse your customers.

    Make sure that what the customer receives at each price point is very clear. In John's example, you can quickly and easily do some maths around the number of keywords and get an idea of "value".

    However, if the features at each of those price points varied significantly then it becomes a lot less clear which is the best choice and the customer can become confused/unsure to the point that they don't buy at all.
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  • Profile picture of the author ChrisBa
    Originally Posted by behnampmdg3 View Post

    Hi;

    I was watching victor Antonio upselling video and he says offer 3 prices.

    I'd never heard that one. Is this a good set up for selling on the internet as well? Or it doesnt really apply to online selling?
    IMO, almost anything that works for brick and mortar or other adveritsing should be tried online as well, chances are it will work.

    I do like the technique that John Pagulayan outlined about the 3 prices to help push more sales to the more expensive option
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