All too often contractors sit down with customers only to hear, “the price is too high”. What the customer is really saying is “I’m not sure whether or not your work is worth that much.” We’ve poured over tons of research on the psychology of pricing to build what we believe to be a pretty iron clad pricing strategy for contractors.
Pricing Strategy #1: Use the most expensive plan as a price “anchor” to make your less expensive plan look like a deal! A $55 steak doesn’t look that expensive when it’s next to a $160 steak on a menu. Create two different packages: Package A is the one that includes pretty much everything the customer needs. The second package, package B, is the most expensive package that includes a few bonus options. Package B should be priced significantly higher than Package A. Here’s an example of how a painting company might use this strategy:
Click here for an editable, multi-plan pricing template. Note: to preserve the formatting, you'll want to download it and edit it in Word. If you view it online only, some of the items will not be aligned correctly.
Package A includes: power washing, scraping, spot priming, one coat of mid-grade paint. Price: $1049
Package B includes everything that package b includes plus: a paint upgrade, a second coat of paint, window washing, and gutter cleaning. Price: $2723
Clearly, anybody choosing package A is getting a deal – or so it seems. In reality, package B is what’s called an anchor. Nobody expects anyone to actually pick package B, it’s just there to make package A look like a great deal in comparison.
This information is most effective when you present the two plans side by side in a chart with clear indications as to what’s included in each plan.
Pricing Strategy #2: Turn your price conscious customers into value conscious customers. There was a case in which the magazine, The Economist, provided two subscription options to customers:
Here is the percentage breakdown of the number of people that bought each plan:
Clearly, the vast majority decided that they could do without the additional print subscription and save some money in the process. However, one more option was added to the list. Here is the list with the new option added in:
As you’ve probably figured out by now, no one bought the second subscription because it offered less value for the same price as the third option. Something surprising happened though. Here is the breakdown of how many people bought each plan:
The additional option raised sales of the most expensive plan significantly because buyers chose the option with the high comparative value over the option with the lowest price. Framing your price differently will dramatically change how buyers value your service. With all that said, you will get funny looks from your customers if you walk into your sales pitch with your most inclusive package priced the same as your package. Instead of pricing your middle package and best package at exactly the same price, price your middle package a few dollars lower than your most expensive package. Leave your basic package priced where it should be to accommodate the hardcore bargain hunters. Remember, this method is most effective when you display all three packages clearly on a chart. You want to make comparing the three plans as easy as possible.
Pro tip: Add a colorful message below your chart that gives an incentive for customers to book that day. For example, “FREE window cleaning when you book today!” Let’s re-cap:
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