Most people think that the best way to communicate your prices is to show your lowest prices first.
“Prices from £1.99…”
This goes back to how we were taught numbers at school, but also is rooted in a firm belief that you need to present your lowest price first (i.e., your most competitive price) to attract as many customers as possible.
What would happen though if you flipped this on its head and decided to present your highest prices first?
You might think – “What if it scares the customers away? What if we don’t get enough enquiries?”
There are two important concepts from the psychology of pricing that explain why this can be such a powerful technique.
- High price anchors – if the first price a customer sees is your highest price, this forms an “anchor” in their mind against which they judge the value of the other options. In the Mailchimp example below, the first price you read is $299 which sets a high price anchor. So either the $17 or the $11 option is a bargain in comparison.
- Loss aversion – as humans, we are averse to loss, and we feel psychological pain if we experience loss. In a pricing context, if you start with a low price and then move up through to a higher price, the customer feels psychological pain because they are losing money as the price goes up.
If you flip this on its head and start with your highest price and then move down to the cheaper options, the customer experiences a gain because they are saving money. And in the context of this theory, a psychological loss hurts twice as much as the equivalent gain. (From Daniel Kahneman’s book, “Thinking Fast and Slow” 2012.)
Mailchimp – an example of best practice in pricing design.
I love this example of a brilliantly designed pricing page by Mailchimp. It demonstrates a number of best practices in pricing design as follows:
- It shows their highest price first. This is unusual in SaaS pricing, but I’m assuming they have found it helpful in influencing customer perceptions about price and value.
- The highest price option ($299) is significantly higher than the other two options. Don’t be afraid to have a very high price point for your highest price option.
- It’s easy to read and assess value “at a glance”. Don’t make it difficult for customers to work out which option they want.
- A volume slider scale is also included to calculate the price if you want more contacts on each plan. 200K contacts on the Premium plan will cost $1,300/month.
- A $ conversion rate calculator to show the price in your local currency.
- A “pay as you go” option is also offered further down the page for more occasional users (and who may well be more price sensitive as well).
- And finally, they offer a 15% discount option for charities and non-profits.
Do you see how well thought-through this pricing page is? It uses high price anchors to influence customer perception of quality and value but manages to cover off every other pricing requirement that a customer of theirs may need as well.
Great work by Mailchimp showing that you shouldn’t be afraid of selling your highest prices first.