The Upgrade Nudge Strategy

price psychology value pricing Oct 23, 2017

The upgrade nudge strategy


Today, I’d like to share a tip I learned from the science behind the pricing of menus.  I’m sure you’ve read my post on the magic of three, on how important it is to always offer clients three different packages to choose from.  However, once you've done that, what’s the next stage?  How do you price those three options?

One great strategy to use when you’re setting your prices is known as the ‘upgrade nudge strategy’, and it's particularly useful for compliance work.  Imagine, for example, you have three packages: a bronze, a silver and a gold – or whatever you decide to call them.  One of the things we’ve learnt from the magic of three, from the world of behavioural economics, is that most people gravitate towards the middle option.  And, once you know that, you can use it to your advantage.


You can find out more about how it works by watching the video here.


Why slap-bang in the middle isn’t always good


If, for example, your bronze level is £199 and your gold level is £349, what should the price of your silver level be?  Although your first instinct might be to price it right in the middle – in this case, £274 – that’s not the right answer.  £274 certainly isn’t the price you should choose.

Why not?  Well, the upgrade nudge strategy teaches that the middle option should be priced higher than the mathematical middle.  In the example I gave above, a great price might be £299.  Given that we know most people gravitate towards the middle price, and that many will dismiss the cheapest one without even looking at it in any depth, your aim is to make the difference in price between your middle and top option relatively small.


Supersizing works!


That way, what happens is that a lot of clients will think, "For an extra £50 I get so much more stuff."  And it works.  You’ll see it used in any number of places.  Think about the last time you went to the cinema, for example.  If you bought popcorn or Coke, I can guarantee that the most expensive option you were offered gave you so much more for a relatively small increase in price.  And most people fall for it.  I know I do!  Every single time I end up buying way more Coke and popcorn than I could possibly consume.  All because I can see that a tiny increase in price gives me so much more.  That's the upgrade nudge strategy at work.  



If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.

Wishing you every success on your pricing journey

Mark Wickersham

Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”