Over the weekend there were two TV shows aiming to raise money for good causes.
They each asked viewers to donate a certain amount of money and offered a menu of “prices” that people could donate.
But there was a subtle difference between the two of them.
- Comic Relief – donate £5, £10, £20, £30 or £40 by texting FIVE, TEN, TWENTY, THIRTY or FORTY
- Bake Off – donate £40, £30, £20 or £10 by texting FORTY, THIRTY, TWENTY or TEN.
I am willing to bet that the average donation (price paid per customer) was higher for Bake Off than it was for Comic Relief.
In the Bake-Off example, I suspect most people will choose TWENTY as the amount to donate.
In the Comic Relief example, I suspect a greater proportion of people will choose TEN as the amount to donate.
Why is this?
Its all to do with “price anchors”. The first number you see sets an anchor in your mind against which you judge all the other options.
So, if the first number you see is a high number, all the other options seem good value in comparison.
If the first number you see is a low number, all the other options will be more expensive in comparison.
What’s the pricing lesson?
When it comes to presenting or articulating your prices, always try to communicate your highest price first.
It may be unaffordable for most of your customers, but it has the benefit of setting a high price anchor against which they can then judge the value of your other (cheaper) price options.
If you start with the lowest price first, and then communicate higher prices, its harder for the buyer to feel happier about having to pay more even for better options.
Small tweaks to the presentation of your pricing can have a significant impact on your revenues.
One study showed a 4.1% increase in average prices paid for beer when the menu showed prices from high to low, rather than low to high.
How can you tweak the presentation of your prices to take advantage of this idea?
Let me know if you want to discuss any of these ideas.