I love the internet and social media for all of the interesting ideas that can flow into your life and change the way you do things. One such moment happened to me over four years ago and the seed of it is finally begun to germinate this year (I'm a slow starter). It happened the day I clicked on a tweet from sales guru Victor Antonio and watched his sales training video #3 on how to use pricing options. He starts the video with a simple question from a client of his:
"How can I propose price in such a way that I can get my customers to buy what I want them to buy?"
Let's say that they currently offer their customers two pricing options:
Option 1. £50
Option 2. £25
If the only difference between the two products is that option 2 has less features than 1, which option do you think people tend to go for? If you guessed the second you'd be right. The reason customers tend to choose it is because of an effect called risk aversion, whereby often people tend to choose the cheaper option rather than take the risk of purchasing the higher priced item and over buying.
So how do you get customers to purchase more of the £50 item? Well try add this third option:
Option 3: £100
Option 1: £50
Option 2: £25
Which option do you think customers tend to choose now? That's right. Option 1 is their preferred choice. Ironically it is because of the same risk aversion mechanism that this tends to be true. They don't want to take the risk of under buying the cheap option or over buying the expensive option. Option 1 becomes the safest choice.
Have you noticed how in Starbucks there are three options to choose from when it comes to size (tall, grende, venti)? The same is true of MacDonalds (small, medium, large). They are using the same system. Victor reckons that if you offer three price points you'll increase sales without having to pressurise your customers into buying more.
I like this idea and you can see how it would work with things like coffee and burger meals, where the changes between the product offerings are simple. How could this idea serve our card publishing business? Well, for years we have had just one price for our cards to keep things simple for our customers. This led Blue Eyed Sun to be caught in a loop that stunted our growth. We'd design each new range to run alongside two current ranges and grow sales, but this wouldn't happen. The new range would come out and would knock an older range out of the sky. Rather than adding to sales we were just substituting sales. This had the effect of shortening the lifespan of our ranges and increasing our workload.
At the same time customers had been asking us for larger sized cards. Having seen Victor's video, I was concerned that if we just offered a higher price point range it would sell slowly, even though we might see an increase in our usual card sales. Print runs are expensive and we can't afford to have slow selling stock taking up space in our warehouse.
The solution was to offer the selection of three price points and sizes that you see above. We've tried a variety of card sizes and shapes over the years and chose the original rectangular card size, that we launched our company with, for the smaller range (option 2), named Picnic Time. (We often adapt our other ranges to this size for our international customers so this made good sense). Next we added to our popular 160mm size for our main lines like Vintage and Gorgous (option 1). Finally, we also launched a new range larger sized 215mm square Allotment cards (option 3). These three options serve our desire to offer a range of options to our customers and for them to offer their customer's in turn.
It'll be interesting to see if Victor's approach actually works with greeting cards. I've always been of a mind that customers choose our cards because they like them and that price is secondary. Time will tell. If you like Victor's idea you could look at this for your shop and see if you can increase sales by offering a range of price points, particularly around items you'd like to increase sales of. I've often met retailers who refuse to stock cards above £3 for instance. Perhaps if they had some more expensive cards on offer they might boost sales of their three pound cards.
There's another suggestion of Victor's that's also worth looking at and I've shown it as an example in the image above. He mentions a study at Cornell University (in his sales video #60 on menu pricing) where different pricing formats influenced customer perceptions in different ways. They listed pricing in three formats: the currency price "$12", the numeric "12" and the text "twelve dollars". Typically customers preferred choosing the text option. The $ sign or £ sign is a painful reminder of what we have to pay. By removing the painful reminder, you may be able to increase sales.
Take a look at the pricing on the image above. What do you think? Painful... or not? ;-)
If you'd like to stock our cards in your shop click here
Watch the sales training video by Victor Antonio
Read what I learnt about selling from Liberty's top sales staff
Download our free retail report on how to grow your retail sales
