Good, better, best is a pricing technique every business should consider. It is a subset of versioning that leverages the psychological workings behind how your customers make their buying decisions. The crux of it is this:
People who are unsure what they want, buy “Better”.
Go back and read the sentence again.
Why Good – Better – Best Pricing is Effective
This is also known as the “magnetic middle” in behavioral science. Customers avoid “Best” because they are afraid of paying too much, and they are afraid of “Good” because if they choose the lowest quality option, they may come across as cheap. When uncertain, customers will avoid the risk of extremes, and buy “Better”.
If you currently only offer two versions of your product, then adding a third version (with the new version being at the high end) will almost certainly increase your profitability.
For you, this means that if you currently have two versions, you should seriously consider adding a third with more features, and at a HIGHER price. This will likely sway any of your customers who were debating between buying your “Good” and “Better” to choose “Better”. You will also likely sell some of your new “Best” version, with presumably much higher profit than your other offerings. Overall, simply adding a “Best” option puts more dollars in your pocket.
The action you can take today
Look at your product portfolio. Is there anywhere you are only offering two versions? Figure out how you can add a third, more expensive, higher-margin option, as this will increase your profits.
Tags: pricing foundations