The Art of Pricing: Always Have a Higher-Priced Option

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Last week, I said that when quoting a price, if you don’t put it into the right context, your prospect will.

We naturally perceive things in comparison to other things. So if you fail to provide something with which to compare your price, your prospect will naturally tend to compare it to another cost.

The problem with comparing marketing costs to, say, the cost of insurance is that insurance is an overhead expense that does nothing to contribute to the bottom line. Whereas, marketing is a revenue-generating investment. Here’s how to prevent your prospect from making that type of apple-to-oranges comparison.

Always Compare Your Price to a Higher-Priced Option

My wife recently joined a subscription-based nutrition website. With it came access to professional, certified nutritionists, healthy recipes, exercise advice, and an active members forum. The sales video we watched before signing up started out talking about how the cost a personal trainer, diet coach, and gym membership could add up to hundreds, or even thousand of dollars over time, then contrasted it to their one-time subscription fee. You’ve probably seen similar sales pitches where the cost of attending a live seminar is contrasted with the DVD or CD series.

The reason this works is due to the effect of perceptual contrast–which makes the smaller amount seem even smaller by comparison to the larger.

Suppose I were to ask you to borrow $10. I could make that amount appear smaller by first asking to borrow $20. The perceptual contrast principle makes you less inclined to turn down my second request of $10 than if I’d asked for that amount straightaway.

Here’s another reason this is so powerful. Backing down from my initial request of $20 is seen as a concession on my part. That puts you in the position of feeling obligated to make a concession in return.

That return concession is a variation of the Law of Reciprocation, which states that we’re obligated to repay what another person has done for us—in this case, an obligation to make a concession in return for someone who has made a concession to us. When the other person views your second request as a concession, he’s more likely to respond with a concession of his own—by agreeing to your second request.

How effective might this be when pricing your services? A higher-priced option that’s just out of reach, budget-wise, can make the price you actually intend to present more palatable.

When I sold Yellow Page advertising, I learned to bring three programs to the meeting, a dominant program, a competitive program, and a representative program.

The dominant program was an aggressive plan, one designed to get the advertiser the most eyeballs and the most calls. But depending on the heading, getting a large enough ad to beat out the competition could be expensive.

Even though I fully intended to sell the dominant program (because I believed it was in the client’s best interest), the aggressively-priced option solicited the perceptual contrast principle nonetheless, and made the competitive and representative programs seem more affordable.

Having one or two additional programs as a fall-back is invaluable. I wish I’d know this during my web days, when we’d just walk out the door when the client rejected our one-and-only proposal. Are you doing the same?


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John TabitaJohn Tabita
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Former owner and partner of web firm Jenesis Technologies, John is currently Director of Digital Strategy at Haines Local Search, a company providing local search marketing solutions to SMBs, including print and Internet Yellow Pages, web design, and local SEO. When not working or spending time with his family, John offers great sales and marketing advice on his blog, Small Business Marketing Sucks. When not working or spending time with his family, John offers great sales and marketing advice on his blog, Small Business Marketing Sucks.

Businessclientsfreelancefreelancingprice quotingsalessellingselling your servicessmall business
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