Many years ago a famous retailer introduced a new high-end kitchen product. It was the best they had to offer and naturally, their most expensive. When they introduced this item they were expecting to reach a small niche consumer base, but surprisingly, the retailer witnessed a different phenomenon altogether. Sales for the old item that was replaced in both price and prestige more than doubled immediately upon introduction of the newer higher end item. In less than a few months the retailer sold more of the older item than they had the entire year prior. What happened? The answer can be found when one has a better understanding of the psychology of customer choice, and it offers some interesting insights into how to go to market with the services you provide.
Behavioral scientists of all persuasions find that when customers consider a particular set of choices (services or products) they tend to favor alternatives that are compromise choices. These are choices that fall between what they need at a minimum, and what they could possibly spend and fully desire at a maximum.
Therefore, when people must make a decision between only two products or two services they often compromise by opting for a service that seems more “doable” in their minds. And if there is only one option offered then the customer’s decision may be to simply look elsewhere for help. What is even more interesting to note is when a third service option is introduced. When presented with a third option that is even more expensive than the other two, the previous “high end choice” shifts to become the “moderately priced service”. This restructured option is more attractive than the lower end service but not quite on par
with the highest. And yet, people are inevitably drawn to this option. And why not? It offers more than the lower end service with the added benefit of being more cost effective than the high-end choice.
In this way high end products provide some very important benefits for your business:
•They offer top of line and all encompassing services that meet the high end needs of a small group of current and future customers.
•They change the customer choice model by offering an additional option. This serves to not only expand your services but to make them more attractive to customers based on the psychology of customer choice we discussed earlier.
Researchers also note that the elimination of a high end or expensive service offering may actually have a negative domino effect on other areas of your business. You may have very good reasons for getting rid of a service (e.g., limited use due to cost). But remember, removing it as an option will reposition another of your services in the “high end” role and this may actually lead to a reduction in usage of that service as well.
If you offer workshops, individual psychotherapy, coaching or group therapy services you may want to examine whether or not you have a good balance of service offerings. You don’t want to offer too many options as this may confuse and deter people.
However, too few options also prove limiting and restrictive. Your best strategy is to offer three to four good choices for a specific service or product. This helps to frame your services and gives people an opportunity to make a more informed choice.
As an example, if you’re delivering a two-day workshop you might want to consider giving people a few additional choices. Studies show that this increases attendance significantly. Offer a full two-day program at $150 per person on one end of the spectrum (complete with a workbook and all the bells and whistles) and a $80 first day only program on the other end. And in between, consider offering a mid-level service in
both price and substance so that more people are given an opportunity to benefit from what you have to offer.
You can use this approach to lay out a variety of service and product offerings regardless of what you do in the field.
David P. Diana is a counselor, author, and a director for a behavioral healthcare organization. He writes a weekly blog on sales and marketing for counselors (www.davidpdiana.com)