Good-Better-Best Pricing

pricing-options-for-roofing-contractorsGood-Better-Best Pricing is when you offer your customer three options — at three different price points.

There are some sales benefits to offering “good better best” pricing. For one, you can transform the sales situation from “Are you going to hire us to re-do your roof or not?” into “Which product will you go with when you hire us?”

Also, human nature often makes people choose the “middle” option. (See the beer experiment below.)

I know this to be true about myself. If I’m in Best Buy, for example, buying a TV, I’m not going to choose the cheapest one — and I’m not going to blow money on the most expensive, either. I know I’ll probably wind up with one that’s in the middle — but on the higher side of the middle. After all, I want a good TV that will serve me well for many years, right?

Let’s say you don’t usually do good-better-best pricing options for your prospective customers. Well, you actually are still giving potential customers an option: “all or nothing.” Do the job with you (all) or don’t do it (nothing.) The customer’s in the driver’s seat and could certainly choose “nothing.”gas-choices-roofing

If they choose nothing, to you that means no sale.

People like choices, though. And with good-better-best, you’re giving them more options: “all or nothing” becomes “good, better, best, or nothing.” In that scenario, only one out of four choices results in no sale.

One more point on good-better-best. Scientists study this type of thing — they call it “price bracketing.”

There is a perfect example of good-better-best quoted in the book Priceless: The Myth of Fair Value (and How to Take Advantage of It).

Here’s what happened in a nutshell:

Bar-goers were offered two bottles of beer: bargain beer for $2 and “premium” beer for $3. Most people (80%) chose the premium, $3 beer.

Now a third beer was offered at an even lower price, so in addition to the $3 premium and $2 bargain bottles, customers could also choose a $1 “super bargain” beer.

What happened as a result? You probably see this coming: most people (80% again) chose the middle option, the bargain beer. Sales of the premium beer fell drastically.

Finally, the “super bargain” beer was removed. Instead, people were offered a “super premium” beer at $4. When given this choice ($4 super premium, $3 premium, and $2 bargain), customers overwhelming chose the middle option, the $3 premium beer. 85% chose this option.

Roofing is an industry ideally suited to good-better-best pricing. In roofing, there are legitimately many options for customers to consider.

So if you don’t do good-better-best, why not? Creating price options for your customers doesn’t have to take you a lot of time. And the benefits can be huge.

The three glasses of beer photo was taken by Martin Pettitt. The gas prices photo comes via Daniel Oines.

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