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“Nobody bought the cheapest option.”

The following is excerpted from pricing experiments you might not know, but can learn from.

People were offered 2 kinds of beer: premium beer for $2.50 and bargain beer for $1.80. Around 80% chose the more expensive beer.

Now a third beer was introduced, a super bargain beer for $1.60 in addition to the previous two. Now 80% bought the $1.80 beer and the rest $2.50 beer. Nobody bought the cheapest option.

Three beer bottles

Third time around, they removed the $1.60 beer and replaced with a super premium $3.40 beer. Most people chose the $2.50 beer, a small number $1.80 beer and around 10% opted for the most expensive $3.40 beer. Some people will always buy the most expensive option, no matter the price.

You can influence people’s choice by offering different options. Old school sales people also say that offering different price point options will make people choose between your plans, instead of choosing whether to buy your product or not.

How to test it: Try offering 3 packages, and if there is something you really want to sell, make it the middle option.

The story is referenced in William Poundstone’s 2011 book Priceless: the myth of fair value (and how to take advantage of it). Via the 11 ways that consumers are hopeless at math, on The Atlantic.

Beer bottle photo by jovike

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15 comments about ““Nobody bought the cheapest option.””

  1. The old ‘Good, Better, Best’ scenario. People like to upgrade. Especially when it’s something that is a treat. They want to feel special.

    As long as the product matches the promise and it’s not simply a branding exercise soaked in manipulation and lies.

  2. That is a great observation and so true. I sometimes see web design companies offering 3 price points and in theory this must work. Thanks for sharing David.

  3. Sheena Iyengar’s talk “the art of choosing” comes to mind here:

  4. I work exclusively with small businesses and I have always offered several “packages”…. This article is soooooooooooooo true! I have sold the cheapest option only about 5 times! Thank heavens for human nature or I would have gone broke years ago!

  5. This is one of those things that never occurred to me to do, but sounds super obvious after reading it.

    Also, I’d like to drink at this bar.

  6. Maybe it only works for beer, people pay any price for beer haha, now for design?

  7. David, you are 100% spot on. Not enough people pay attention to price points.

    Another thing that happens is when the extra value offered by the highest price over the second choice is so outrageously in disproportion to the extra price. For example…

    Large Code, 16oz = 2.70
    Super Size, 32oz = 2.95

    Double the quantity for only 25 extra cents… Would you like to super size that?

  8. Oops… I meant Large “Coke” in that last comment.

  9. This is great, David! I love learning about the psychology behind buying and how it applies to pricing creative services. Thanks for the link

  10. Awesome post!

    Just figured I’d let you know there’s a typo…arounf should be around…

    Third time around, they removed the $1.60 beer and replaced with a super premium $3.40 beer. Most people chose the $2.50 beer, a small number $1.80 beer and arounf 10% opted for the most expensive $3.40 beer. Some people will always buy the most expensive option, no matter the price.

    Sorry, it’s the designer in me!

  11. Good of you to let me know, Kurt. Cheers.

  12. How would you translate this to say, logo design?

    Would the multiple packages refer to amount of logo options they receive? Time frame?

  13. The variations could be the deliverables, so you might offer the logo as a one-off, or you might also add designs for stationery or a brochure or a website.

  14. Hi David,

    (Loving your book by the way), But doesn’t this tactic fly into the face of ‘design is a handmade/made to measure’ service which is different for each client?

    If you start offering ‘stock options’ doesn’t design become a mass-product instead of handmade-quality work? I’ve though about this pricing model many times, but backed out each time because of made me feel like I was running a factory…

    Also, keep in mind the paradox of choice… In Dan Arielly’s book he mentions that if you offer 3 choices of Jam in jars in a supermarket, people will pick one, but when they offered 9 Jam choices in the supermaket-test 80% of the people walked away all together because they were overwelmed by choice and it paralized their decision-making mechanism.

  15. Hello Paul, I don’t see it as stock. I see it as offering choice. My pricing is tailored to each client, but that doesn’t mean I can’t split the pricing into different options. I might quote a price for a brand identity (trademark and stationery) but also include a higher price for additional deliverables (a brochure, website, poster series, etc.). It’s a pricing choice, but one that isn’t set in stone from client to client. Glad you’re loving my book, by the way. Thanks a lot for picking up a copy.

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