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Why you need to offer options when pricing

Apple offers 3 options when you buy an iPhone or an iPad (16GB, 64GB, or 128GB storage options). Same with Starbucks: Tall, Grande, Venti. When you think about it, you start to realize you see this in many places. Even when you go to the gas station it’s Regular, Plus, or Premium.

So why offer 3 options? The main reason is this: to make more money. By providing options, occasionally the highest priced option will get picked. And often, the middle priced package will be purchased.

For Apple, when you pick the higher storage options, it’s almost pure profit. Here’s a short but fascinating article about how Apple makes money. Interestingly, most of their profit comes from memory upgrades!

Imagine all the money Apple would leave on the table by only offering the 16GB option.

When I waited tables, we were always instructed to offer the customer something extra they might enjoy. “Can I start you with drinks?”, “Would you like to look at the dessert menu?” or, more subtly, “Would you like to add your dinner’s recommended wine pairing to your order?”

Notice how with that last one, the work of figuring out the wine pairing is already done for them? All they have to do is say yes.

The goal in a dining situation is to make the customer enjoy their evening. They can decline your offer if they want, but there is nothing weird about making that offer.

Same thing with client services but the goal is to solve their business problems.

But if you don’t make the offer, the answer is always NO.

So provide prospects with an offer they CAN say yes to. They can decline if they want. Or, they might consider it.

Give yourself more chances to get a “Yes”

For freelancers, when you offer only one option, you are asking your prospect to make a take-it-or-leave-it decision. You want to avoid that. Yes-No decisions lead to comparison shopping.

Instead, get them to consider your offer by giving them multiple options to choose from. This changes the question in their head from, “Should I work with Bob” to, “Which of Bob’s options should I choose?”

By offering more choices, you are giving yourself more chances of getting a “yes” answer.

Why 3 options is the perfect number

When you price using 3 options, you take advantage of the Center-Stage Effect where what people choose most often is the middle option.

For example, most people pick Apple’s 64GB option or Starbucks’ Grande option.

Knowing this, you’ll want to set up your middle option to be your most attractive and (if possible) your most profitable.

Not too much and not too little is just right. You need to find that sweet spot in your offer.

So why not 5 choices? Or 10 choices?

The goal is to offer SOME choices. Not EVERY choice.

Too many choices can tire a person out and lead to decision fatigue.

If you’ve ever looked a menu with 50 options on it, you know the feeling I’m talking about.

It’s the same thing that happens when you show a client 25 logo designs—it always ends in disaster.

What if I offer a ton of services?

First, read this post to get a better understanding of positioning.

But if you do want to offer a lot of different services, think of like this: When you look at most successful businesses, you’ll notice they make the decision to buy an easy one.

Take In-N-Out Burgers for example. Think about how simple their menu is.

They only offer 5 individual items (plus drinks).

 

In-N-Out offers a simple menu and a few packages
In-N-Out offers a simple menu and a few packages

(But notice they also offer 3 package options) 

Now, just because In-N-Out only has 5 items and 3 packages listed it doesn’t mean that is all they offer.

They have 80+ items on their “secret” menu. But they don’t advertise it on their menu.

You can do the same. Keep your offer simple and if you have complimentary services, you’ll have plenty of time during the buying process to mention it to your prospect or put it in one of your 3 packages you are offering to them.

Takeaways:

Many of the pricing and packaging principles used by large companies can be used on your proposals to help you earn more money. With client services, we aren’t selling burgers, but you can still package your services in a similar way.

  1. Offer more than one option in your proposals to avoid a yes/no buyer decision. If you don’t offer more, the answer is always NO
  2. Find the sweet spot. Don’t offer too much and to avoid decision fatigue, package your services in a way that keeps it simple and easy. Don’t make your client think too hard about the choices
  3. When you have multiple services, bundle them in packages instead of listing them out individually. You can always customize a package for a client if you choose to, but steer them towards the packages first

 

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