When we make purchases, traditional economic theory states that we use a cost-benefit calculation to make our decisions. It also states that our preferences are well-defined and constant over time. But is this really true? Are we really as rational as we think we are? Behavioral psychologists suggests not.
Instead, they suggest that a purchasing decision we make is largely effected by the context we make it in. The value that we link to a particular purchase option can vary depending on mood, previous experiences, the number of options available and other factors, But one of the most powerful forces that exerts a much bigger control over our final purchase decisions is the context, the manner in which the alternatives are presented.
Using Context to Increase Online Purchase
Let’s look at the online purchasing behavior of visitors browsing a real financial site that offers these three typical service plans:
Using ClickTale’s customer interaction heatmap to capture visitor mouse movement on the page, an interesting observation comes to light: Although the most popular choices are always Bronze (free) and Gold (highest price), visitors devoted a considerable amount of attention to Silver.
Analyzed through traditional economic theory, the Silver plan is useless and should be dropped from the site. However, people spend a great deal of time looking at it because it has psychological value. It is our reference point from which we determine the “worth” of the other two plans. If it’s dropped, the majority of users will choose the free Bronze plan. But by keeping Silver in place, we actually drive more people to choose Gold – the most expensive plan!
Had site visitors been offered only two choices -- the free Bronze plan or the Gold $18.99 complete plan -- the Gold option would likely have seemed too expensive and possibly unnecessary. But the presence of a Silver priced option creates the impression that the free option is inadequate for serious users. Thus, the choice becomes one between Silver for $13.99 and Gold for $18.99. The extra $5 is perceived as only a small price to pay to receive ‘all services’ and so visitors perceive they’re getting a better deal by going with Gold!
How to Apply this Principle in Your Online Business
We can now draw some conclusions and recommendations:
1 - Without a well-designed reference point, visitors will most likely choose the least expensive option on your website.
2 - The most efficient way to activate the relative thinking process to emphasize one option over the other is to create exactly three (A 4-way comparison is too cognitively confusing.)
3 - Persuade your customers to purchase the more expensive of two options by adding a middle ‘Silver’ option that’s not much cheaper than the expensive one but that contains significantly fewer features or services.
4 - Ensure that your Gold plan has enough value features to significantly distinguish it from the Silver plan – while selling for only a small price more.
Conclusion: Time to Create Your Gold Plan!
We make decisions using relative thinking, but only when the framing of the decision triggers us to do so. The decision making process during relative thinking is automatic. So your potential customers will focus more on the quantity of features offered, rather than the quality.
For example, if your company offers two types of editing services – (1) proofreading, and (2) proofreading + academic editing – create a third plan that also includes consulting services. By offering an additional service that you probably already provide anyway, you’ll be able to significantly increase your sign up revenue.
Regardless of which service plan or product you would like to promote, if you don’t have a “gold” plan, now is the time to create one! Some customers will choose the Gold plan no matter what, because of the perception that the most expensive plan is always the best. But you’ll also gain from those customers that now choose your (previously most expensive) ‘Silver’ plan rather than your free plan, because it seems like the rational decision in comparison.
By analyzing parameters such as attention, hesitation, engagement time, and mouse move and clicks, online business can easily identify the factors that affect online decision-making behavior, and optimize their sites accordingly. Learn more about ClickTale - Converting Behavior to Business.
Schedule a private demo.