I remember when Williams-Sonoma launched the automatic bread maker.  It was quite a revolution.  With a couple of ingredients or even a pre-done box mix, you could make fresh bread with very little effort.  Fresh, homemade bread, what a wonderful way to feel like you’re doing something great for your family, right?

Well, it didn’t come cheap or did it?  The price was $275 and this was a product that had no competition, so how do you know if the price is right or not?  Some people immediately think, measure sales, do they meet projections or sales trends of other similar new product launches.  Now I like a good spreadsheet as much as the next executive, but here’s another way to think about this situation.

Let’s assume sales aren’t going according to projections, what could you do to encourage consumers to buy the product?  Cut the price, sweeten the deal, what else comes to mind.  How about this, you launch a “deluxe” version of the bread maker priced at $429.  What happens then?  If you said the regular, $275 breadmakes would be flying off the shelves, you are right.

Consumers need this kind of help.  When you have a product that they don’t know how to value, the are not likely to buy.  Giving them a second price point, in this case a deluxe model, gives them a reference point and then they can feel good about buying.

Some businesses like the three product strategy with a low, medium and higher priced model.  Many times they don’t even expect to the highest priced model to sell, it’s job is to help sell the medium priced model.  Think about your own shopping experiences, you’re standing in the aisle, eyeing the budget, standard and deluxe version of a product, which one to gravitate to?

Think about your business.  Are there products or services that you offer where consumers need an additional reference point in order get your products flying off the shelves?

John Ryan

Host of Key Conversations for Leaders Podcast, Executive Coach, Consultant, and Trainer

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