Tuesday, August 31, 2010

How to Get Better Results for Clients

If you want to sell something at a higher price, another strategy is to offer more than one size. Three sizes, in fact. Consider this theatre example in value pricing.


Years ago, theatres would offer two choices of drink sizes, large or small. As it turned out, eighty percent of the customers at the theatre always ordered the small drink. This went on for many years at every theatre across North America. Eighty percent of the people bought the small size and twenty percent bought the large size.


Then theatres introduced a third size, a supersize. Following that, twenty percent of people bought the small size, sixty percent of customers bought the regular size – which is actually the old large – and twenty percent of people bought the supersize. This was something theatre owners never anticipated. Now they had eighty percent of the people ordering the old large size or an even larger size, the supersize - all because they introduced the third choice – the supersize.


This is human nature. If you sell one size (or one campaign choice) – which most stations do – the customer has a choice between only ‘yes’ and ‘no’. And because they don’t have anything else to think about, they focus on the price. They try to get you to lower it.


Now if you have two sizes, that’s an improvement. The customers are choosing between the small and the large, so they’re more likely to buy something. There’s one problem: Most people will choose the small size.


Remember that, in the theatre’s case, 80% bought the small size. They chose the small size because most people think small, they are trying to save money or they are cautious because they aren’t sure if they are making the right decision. So they play it safe and buy the small. It is almost always eighty percent small when you offer only two sizes.


If you offer three sizes, however, the whole game changes. Customers will start by looking at the large size first, or the most expensive or most elaborate offering. They will look at it first because it is so dazzling, so beautiful, so powerful or so huge. Then they will look at the price and realize it is out of their league. So they will then look at the small size. But the small size doesn’t look so great compared with the supersize. It looks cheaper, smaller, and unappealing. So then they look at the middle size and that looks just right. It’s not too small or too large. It’s not too cheap or too expensive. And because it is called the regular, it is also the safe bet because it means that it is the one most people buy. Robert Southey, author of Goldilocks and the Three Bears must have been the world’s first consumer purchase researcher when he wrote about this effect back in 1837: Goldilocks selected the middle size with every choice she made.


Most people will buy the middle box because it is the one they think most people buy. So here’s the strategy: if you have something you want to sell most of the time, position it in the middle, make a small version, and a supersize version, and most people will buy the one in the middle.


But what about the supersize? Why do some people buy that one? Well, that’s the bonus of using the power of three. Most people will buy the regular middle box, but some people will go for the super-size. And the irony is, you weren’t even expecting to sell the supersize. You simply created it to get more people to buy the middle one. By adding the more profitable supersize option, you can also charge more for the regular size.


Suppose you were going to charge five dollars for your regular size. Now you can charge ten dollars - because the supersize costs fifty dollars. The ten-dollar size will look reasonably priced compared with the fifty dollar supersize. So you can make more money. As well, no one will ever say you charge too much because you aren’t actually charging too much. You are just giving them a choice. The customer has to decide if they are the kind of person who drives a Volkswagen, a BMW, or a Maybach. They decide what kind of person they are – or want to become.


The power of three will work in every business so you can use this strategy to help your clients or to package your presentations to the client. It will work with watches, travel packages, fast food, consulting services, diapers, and private jets or radio campaigns. The principles are universal. You just have to spend the time developing the three boxes. The strategy works because you are giving your customers and prospects a choice. That’s what marketing is all about – choice. Let the customers make up their own minds.


As well, it’s important to remember that the number three is critical. Otherwise you might be tempted to give people four choices. Yes, they get more choice. But too many choices can be overwhelming. They might not be able to make up their mind (more about this in my next article). As well, with four boxes there is no middle. With four boxes, you can’t choose the one in the middle, so it’s harder to make the easy, safe choice. With four boxes, people tend to get confused. And if they get confused, they might not buy anything at all.


Here’s an example of what a radio station might do to propose 3 solutions:


1. Determine the least expensive, EFFECTIVE campaign for your client (say a 13 week radio only campaign)

2. Develop a campaign that will really work for your client that you feel is the way you would spend your own money if you really wanted the campaign to be successful (say a 26 week campaign with a supporting internet strategy)

3. Develop a full blown campaign (say 52 weeks, including radio buys, internet strategies and other media coordination) that will blow your client way with its magnificence.


Make sure the last option is over the budget they told you. Always include an option that is over budget.


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