Wednesday, 5 August 2009

It's not how much but how much more

Fascinating example of relative pricing.

Do we sell a mobile phone tariff for £10 pcm with 50 free minutes or 150 free minutes? They both undercut the competition but clearly the 150 minute free minutes tariff creates less margin but will be more attractive to consumers. So what do we do?

The answer. Do both. And put the price up.

So you have two potential communications

A) £10 pcm with 150 minutes

B) Choose between £10pcm and 50 minutes or £12pcm and 150 minutes.

Which sells more?

It's B) and they buy the more expensive option. This is counter intuitive but the consumer rationale is 100 free minutes extra for £2. No brainer.

It's all relative!

Tariffs and offer changed to protect any potential client confidentiality.

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Just curious about marketing, psychology, economics, business, irrational behaviour, people, models, communications, advertising, market imperfections, b2b marketing. I work in the marketing communications industry for OgilvyOne.