Have you paid for a service or product recently? Did you have to choose from more than one option or plan from the same place? Did you go for the middle one? If the answer to one or all question is YES then chances are you practiced the principal of contrast pricing.
This post is for the people who want to know what contrast pricing is, how we all have practiced it, how business use it daily and what you can do make sure you do not fall for it.
What is contrast pricing?
Contrast pricing is a strategy used by many companies and businesses all around the world. In order to make the customer buy from them those establishments will have more than one choice for the customer.
This way you, the customer can contrast the options they have and choose what suits you but again you end up buying from the same place!
Many times there will be 3 options available, let’s call them A, B and C for the sake of this post.
A: Companies tend to present this option first and it is usually low-cost. (Silver/Basic)
B: This option usually costs more and comes in second place. (Standard/Gold)
C: The last option is many times too pricey! (Pro/Premium)
When we are presented with more than one option we immediately start comparing the cost to the initial item and evaluate which one has more value to us.
I should mention that those options can be reversed for a more effective contrast pricing. Sometimes companies might have a FREE option which is very limited and not that appealing but it is there for a reason.
Choosing a Free service will get you to try it, see how limited it is and hopefully upgrade.
How does contrast pricing work?
This strategy is actually based on psychology. When we are presented with one option we tend to just not go for it, our brain automatically starts questioning if we really need it.
On the other hand, when the same place offers a second or even better a third option we start to compare those options and get to chose one! Think of these options like Silver, Gold, and Premium. Sometimes they might be seen as Basic, Standard, and Pro but the idea is the same!
I am sure you have heard and seen these option at some point even today!
Many subscription based services use them as well and it works! Think about it, how many times have you gone for the gold or standard one?
Below you can check an example of Google’s One Storage packages where they use the contrasting price principal in action!
Do you notice how the FREE plan is very limited, this right away makes us compare it with their RECOMMENDED plan. I am sure you think it offers more value and you are right. However, if you are not a professional or an expert who really needs that much storage (100 GB!!! who needs that much for personal use?) you don’t really need this plan.
Be honest you did consider getting the RECOMMENDED plan, didn’t you?
That my friend is the magic of contrast pricing!
How do businesses benefit from this strategy?
What businesses aim with this is to get the majority of the people to get the one they really want to sell. Can you guess which option they really end up selling?
That’s right, B. Did you know that 60 % of people decide to go with option B, the one that sounds logically priced and it offers some more features than the limited option A. It is not too cheap nor extremely expensive and therefore more people get it. 20 % go for option A and the rest 20% choose option C.
This scenario is based on a 3 option service plan! Even if you see 2 or 4 options like the plan above it still works the same way. People still get to compare 2,3, or 4 different options and get to choose most likely the 2nd one.
So what do we conclude from contrast pricing strategy?
All of the options sell! Businesses end up with huge amounts of revenue from a strategy like this!
Even the Premium/Pro one have an audience and to be honest I have too fallen prey to this strategy! The truth is that even if a price is too much for some, the same price might be just right for others.
I always say ” If there wasn’t any people spending ridiculous amounts of money, there wouldn’t be a market for those products or services”. Yes, I know good things are not cheap but I think there are ways how to go around spending that much. Most of the times we don’t really need to.
How to avoid getting tricked by contrast pricing?
There are some things you can do to make sure that you genuinely want to get the service or product. Consider asking yourself the questions below:
- Do I really really need that product or service?
- How is this product or service going to be beneficial to me?
- Does the product or service really deserve the price?
- Are there better prices out there?
- Is the business legitimate?
- Do I have the budget to spend on this?
When was the last time you were unintentionally contrast pricing? Have you used or do you know anyone that is using this strategy? What do you think of contrast pricing? Let me know in the comments!
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