Tuesday, January 2, 2007

Show the Highest Price First

Inherently, consumers don't know how much unfamiliar things cost (think about the TV game show The Price is Right). The first price they see will be imprinted on them like a baby duckling to his mom.

A few years ago, I read about a study where people were shown a shopping bag with chocolate, cheese, and wine without a price. They were asked for the last two digits of their Social Security Number (SSN) and then told that the two digits was the cost of the items in the shopping bag. For example, if the last two digits of their SSN were 22, they were asked, hypothetically, if they'd pay $22 for the shopping bag of items.

In other words, the study participants knew that the pricing was random. Now a strange thing happened when they were then asked how much they'd be willing to pay for the items. The people whose SSNs ended with higher digits would, on average, be willing to pay more money for the same items in the shopping bag than the people with the lower last two digits. This is simply because the initial price they were told - even though it was random - was imprinted on them.

Practical Applications
In 1998, I started shooting and selling digital photos at races (5Ks, 10Ks, marathons, etc.). In 2002, I moved this side business online. In the beginning, when shoppers would put photos into their online shopping cart I would automatically choose the lowest priced format in the shopping cart's pop-up menu. After reading about the study I mentioned above I changed the shopping cart logic to display the highest priced item instead of the lowest. So, now, shoppers see the most expensive price possible ($59.95) and suffer a minor heart attack (click image for actual size).

Initially, the shopper was thinking that it's going to be very expensive to purchase their race photo. But, once they see the lower priced options in the pop-up menu they feel a great sense of relief and, unconsciously, they are now willing to spend more money (click image for actual size).

So, did this tactic mean more money in my pocket?
You bet - the average value of each order definitely went up!

No comments: