Once I heard a story about a German man who’d just gotten a shiny new GPS unit in his car.
That little device seemed magical—he could just punch in his destination, then shut off his brain and follow the prompts to wherever he was going.
One day his GPS steered him wrong—and he drove his car right off a cliff.
A lot of maxims and rules of thumb in marketing are like that.
They’re great guidelines, but if you follow them blindly you can find yourself in trouble.
Case in point:
I’m involved with this project with a few other entrepreneurs.
When the topic of how to price the different tiers came up, someone trotted out this “truism”:
“With multiple price tiers, nobody buys the top tier. The only purpose of the top tier is to ‘price anchor’ the middle tier.”
“Price anchoring” is one of those tactics that just drives me batty.
Is price anchoring a real thing?
Yes, it is.
Offering multiple price points does shift the way your customers perceive your offer.
Is it always true that just slapping three pricing options on your sales page will trigger a stampede to buy the middle tier?
No, it is not.
I’m testing this right now with Simple Programmer’s flagship product, a video course that used to sell for $299.
I created three pricing tiers at $99, $199 and $299.
(Incidentally, these are the same price points that were being discussed by me and the other entrepreneurs I mentioned.)
And after having these pricing tiers in place for a month, the results are clear:
81% of sales are coming from the tier that “no one buys”—the top tier.
And only 8.5% of sales are going to the middle tier.
There’s a whole lot more that goes into the decision over which tier to buy than just the price.
Most important of all is:
The buyer’s level of INTEREST and DESIRE for what you’re offering.
That’s why Josh’s Rule of Sane Pricing #1 is:
Price your products to sell.
In other words, don’t just throw a garbage offer on the page with a sky-high price tag “because, price anchoring.”
If you’re going to sell an ultra premium platinum package, make sure it’s something that your most rabid customers would actually WANT.
You won’t sell a lot of this high-end offer—
But a few customers WILL buy it, and you might be surprised at what those handful of sales will do to your bank account.
P.S. In the Simple Programmer pricing experiment I mentioned, clearly our price tiers are whacked.
Because the bottom and middle tiers aren’t selling, and that likely means we’re leaving money on the table.
For the next month, I’m actually going to lower the prices across the board and measure the effect on sales and revenue.
Should be fun—stay tuned!