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Interesting Case Study on The Power of Price Anchoring

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SARubin
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Interesting Case Study on The Power of Price Anchoring

Post by SARubin »

Here's a neat little trick anyone selling tiered offers might want to try.
I was recently testing some ideas with a long-term client and we stumbled on this little gem...

Like most webpages selling different levels of the same offer, his webpage showed the comparison of the tiers, side-by-side...
  • Starter package (low price)
  • Go-getter package (mid price)
  • Mover and Shaker package (high price)
With each one subsequently adding a few more bonus features justifying the higher price tag. And of course we used some basic emphasis styling. Like making the middle tier stand out with a slightly different color and font.
Pretty standard stuff.

Things were working pretty much as expected, which to me usually means they could be better. (That's why we test things, right?)

As chance would have it, I just finished another book about behavioral economics, consumer behavior and understanding what customers want.

On a side note: Have you ever heard something dozens of times and you keep thinking " yeah, that's a good idea. I'll store it away in the memory archives for later". But then someone says it in a different way, at just the right time, and it's like hearing a brilliant idea in your head for the first time?
(Eh, maybe that one's just on me?)
Anyway, this lady is talking about stuff I've heard dozens of times before, but this time it buzzed my ears right when I needed it.


Now back to my client…

For the longest time we were getting significantly more first-timer buyers grabbing the low priced offer more than any other tier.
Which isn't a bad thing because getting an actual buyer in the door is almost always a good idea. Even at a slight loss on the first purchase, the lifetime value adds up.

But you guys already know that. So moving on…


For this test we wanted to see if a simple change would increase the value of first time purchases.


Using the basic principles of price anchoring
, combined with a reverse image of what some people call "best practices", we decided to turn things around to see if it made a difference.

We put the highest priced offer first, and the lowest priced last. (The middle one stayed in the middle)

The hypothesis was by anchoring the high price offer first, the middle one would seem like spending less rather than spending more, as compared to when the lowest price was the first thing they saw...

...So far it seems to be having a positive affect...


Before, more than 80% of first-time purchases were the introductory offer. About 15% for the middle, and a few high-end buyers would show up from time to time. (Yeah I know, we need to work on that high-end offer, but that's for another day. This time around we're testing simple design changes)

After the switch, first-time purchases for the middle tier have shot up to just over 30% of new purchases.
The high-priced buyers have stayed about the same (around 5%). So the increase is coming primarily from the low-end buyers.

Pretty cool the way anchoring works, right?


For anyone unfamiliar with anchoring... In simple terms it means setting a baseline so people's natural inclination for comparison has something to start with.

It's a basic negotiating tactic. When we place a high initial value on something any discount makes it feel like a better deal.

There's more to it than that, but this is a short post so we're not going into the neuroscience of how it works right now.


Anyway, if you sell a tiered offer I recommend you give it a shot. And win or lose I'd love to hear how it works for you

Of course I make no guarantees it's going to work for you like it's working for us (too many other factors at play in any particular campaign). But I've always believed if something works for one offer it's at least worth testing on a different product.
At least that's the way I see it.

Here's to testing small changes for bigger profits, more often...

All the best,
Steve
A good marketer knows how to think like a marketer - A great marketer learns how to think like the customer...
SARubin - Direct Response Copywriter / Conversion Flow Specialist
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