How do you increase profit by raising prices – and increasing sales?
It’s crazy I know, but a study has shown that people relate less with more and more with less!
What this means to your business is that you can offer less and yet charge more and still increase your sales.
Here is an example:
You have a great course selling for $200, and it has amazing reviews that are attracting more customers.
You also offer a bonus eBook valued at $17 that is meant to boost your sales.
However, instead of boosting your sales, that $17 bonus could be costing your sales.
This can be explained by Presenter’s Paradox, whereby perceivers see a weighted averaging pattern that results in unfavorable evaluations when less favorable information is added to very favorable information.
In simple terms, mildly good information that is the bonus in this case actually interferes with how your customer will view you and your product.
A study conducted by three professors to test this theory proved this theory right.
Their main product was an iPod.
In the first test, they bundled an iPod Touch MP3 player with an 8GB memory card and a cover.
In the second test, they offered the same iPod Touch MP3 player with an 8GB memory card, cover, and a bracelet.
Participants in the study were presented with the two packages and asked to tell the amount they would be willing to pay for the packages.
Surprising, participants were willing to pay more for the first package than for the second package that contained an iPod, cover, and bracelet.
In the second test, participants were asked how much they would pay to stay at a 5-star hotel with a swimming pool, versus a 5-star hotel with a 5-star restaurant and a swimming pool.
Again, most participants were willing to pay significantly less per night for a 5-star hotel with a pool than for a 5-star hotel with a 5-star restaurant with a pool.
In another test, a fine of $750 for littering seemed more severe than a fine of $750 plus 2 hours of community service.
And in yet another study, a $1750 scholarship seemed more valuable and made the winner more satisfied than a scholarship of $1750+$15 for textbooks.
To make it clear, in each of these studies, participants were only shown one option and asked to rate it and say the amount they were willing to pay.
There was no comparison.
So, what made the participants to assign a higher value to the options that contained less? The researchers concluded that people subconsciously averaged the items in the packaging.
Thus the lesser item added lowered the average value.
So, how does this translate to an increase in profit?
You need to present great things about your product.
For instance, if you have a tool that does one major thing and several ordinary things, highlight that one major thing.
Second, avoid bundling lesser items in your major product.
If you have to do this, present them as totally separate bonuses that do not relate with the main offer.
Always, test your offer with and without bonuses.
Third, as you are presenting your points, reduce your points to just the best ones and leave out the more mundane points.
People will remember more when you say less than if you duplicate the points and talk about them more.