Studies have shown that too many choices in products and prices can slow down, or worse – discourage, the purchasing process. Pricing structure and the value applied to products play a major role in consumer buying decisions.
According to research out of Yale, if two similar items are priced the same, consumers are inclined to just walk away from the purchase. Definitely not the desired response you want!
Along these lines, there is a theory around “price anchoring.” Anchoring is a common cognitive bias that refers to the human tendency to rely too heavily on the first piece of information offered when making decisions.
how that translates in pricing your products, is that studies show people want quality and don’t mind paying for it. In an experiment designed to explore effects of price anchoring, researchers performed three tests with the price of beer at a bar. They started with a single beer offering at $1.80. When a premium (i.e. more expensive) option was offered next to the $1.80 option, four out of five people chose the premium option. On the other hand, when a cheaper option was added to these two, suddenly the value of the $1.80 appeared more attractive and 80 percent of participants chose it.
The most successful test was when they set the $1.80 as the cheapest option with two more expensive offerings: everyone chose the two more expensive options.
In consumer’s minds, the price of a product subjectively correlates with quality when compared to other similar—or even same—products.
This concept can be translated and applied to activity and tour operations. In your business, do you have too many tours, products, or ticket types at similar price points? Could it be confusing customers and actually discouraging them from making a purchase? Is it possible to add a premium priced offering for the segment of people who always want the very best and perceive price to be a symbol of that?
You can also use that high-end product to position your best-selling product as well priced. As the beer study illustrates, it’s important to experiment with pricing and apply value to your products in order to differentiate them from one another.
Both experiments illustrate the importance of simple, tiered pricing structures that make it easy for consumers to make buying decisions.