The power of price framing
The framing effect impacts our choice between different options/ideas by changing the way the choices are presented.
Dan Ariely uses the example of a subscription to The Economist in his book Predictably Irrational. The framing effect contextualises the information, changing the way we see the offer. In Ariely’s experiment, when given the choice of an Internet-only subscription for $59 or a Print-and-Web subscription for $125, Sixty eight percent of students (68 %) took the Internet-only subscription.
When “price framing” was used by offering a third option, a print subscription for $125, the numbers changed. Ariely found the impact of The Economist offer “framing” on his MIT Sloan School of Management students was:
Internet-only subscription for $59 – 16 %
Print-only subscription for $125 – 0
Print-and-Internet subscription for $125 – 84 %
By adding the second option the preferences shifted toward the third option as they (perhaps) felt they were getting something free. Turnover almost doubled through the addition of the print-only contrast option. The power of price framing is the context it gives the consumer.
We often use comparisons to assess value. So to sell a $1,000 pair of jeans display a $1,500 pair next to them. You may have used price contrast to order wine in a restaurant when you didn’t know the quality of the wines available. Cheap, expensive and middle of the road. To make the more expensive wines on the menu seem more reasonable they may add some wines at much higher prices.
Similarly the Williams-Sonoma chain almost doubled their sales of their luxury $279 bread-maker in their stores … by adding an even higher priced model at $429 (all the same features, only larger). When they had only the one model their bread-maker sales were slow. However next to their $429 model the $279 model seemed (in contrast) a bargain. Adding another price point, even though few selected it, increased the price consumers were willing to pay for a bread-maker.
What will you do to increase perception of your ideas and product value?
If you want to learn how to create One Clear Message when communicating and the impact of price framing then contact us today!
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