Does placement have the potential to increase your revenues?
Background
My wife asked me to go to the grocery store to get unsalted butter. I knew which brand she preferred so when I got to the dairy section and saw the brand I immediately grabbed the item from the shelf.
Then I glanced again at the carton and saw “half sticks.” I wondered if there was any difference in price between half sticks and full sticks. When I returned to the dairy case I found that half sticks were fifty cents higher than full sticks.
That awareness was quickly followed by a realization that the full sticks were on the bottom shelf while the half sticks were nearer eye level.
Placement ➠ Greater Revenues
The placement of the half sticks versus full sticks affords the grocery the opportunity to generate higher revenues off each purchase. That’s because we are creatures of habit. When we see the familiar packaging of the item we want, we take it…often without reading all of the information on the packaging. Why would we? It’s familiar.
Some of you may think that this is highly-manipulative and deceitful…and it could be. Often, the higher-priced items in a category offer higher levels of quality, dependability, reliability or capacity. In these instances, buyers gain a better result from utilizing the higher-priced option.
Is that true for half sticks of butter vs full sticks? I’m not knowledgeable about which recipes call for (half vs full sticks of butter) to answer that question. What I do know is that placement of higher-priced offerings near eyesight can, and often does, lead to greater revenues and profits.
Service Revenues
The same is true for service revenues. Social psychologists studies show that leading with your highest price service offering often leads to higher average ticket sales…and a better result for your customer.
Their rationale is what they call the law of reciprocity. If you do something nice for someone they want to reciprocate by doing something nice for you. In business, when you offer your highest-priced option first, then respond to a price objection with a lower-priced alternative, you’ve made a concession which triggers a desire on the part of the prospect to reciprocate.
I find that this approach feels less manipulative when I add the following language to the lower-priced alternative:
What you’re giving up is…
The reality is that buyers’ objection to price is often a knee-jerk reaction caused by previous experiences in which this reaction resulted in a negotiation which led to a lower price.
By adding the language, “what you’re giving up is…,” you let the buyer know that in order to get a lower price they have to give up something. Buyers typically don’t want to give anything up, they simply want a lower price.
“What you’re giving up…” forces them to evaluate, consciously and objectively, what’s really important to them. Whatever that decision is (higher price or lower price), they’ll be happier with their choice, you’ll earn greater revenues than a negotiated settlement and your customer will get the result that’s a good fit for them.
Takeaways
Assuming that your higher-priced offerings afford a better result for your customers, place your higher-priced offerings near eye level with lower-priced offerings farther down on the display.
If you’re offering services instead of products, offer your best (highest-priced) alternative first, then respond to a price objection with a lower-priced alternative while adding the language: What you’re giving up is…
These are honest, customer-centric approaches to assuring your customers the best possible result given their budget while assuring you greater revenues while maintaining your margins.
Effective placement benefits both you and your customers…as it should.
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Resources
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