PRICING STRATEGY
Some members may use the sauna but not the
pool, so offer them a price bundle to reflect that
“Don’t necessarily drop an option just
because nobody buys it – this could be the key package that trades members into higher value options”
which factors are more important to the different member types, and which are real deal-breakers for them.
PREDICTABLY IRRATIONAL But while research can place relative values on each of these factors, we can’t ask people directly what these factors are as none of us, from a rational point of view, actually think that way. People don’t use rational criteria to buy goods, services or memberships. Dan Ariely’s excellent book Predictably
Irrational gives countless examples of ways we can be manipulated to buy what the seller wants us to buy and how, in his words, we don’t actually know what our preferences are. We’re not rational beings who consider all the implications of the choices we make. This is why segmentation and differentiation is a tricky business: direct questions will yield direct answers which are over-rationalised and often bear no relation to reality. One of Ariely’s favourite examples
concerns subscription charges for The Economist. Two scenarios were tested among different groups: the fi rst offered an online subscription for US$59 and a print + online subscription for US$125, while the second offered these two plus a print-only subscription, also at US$125. Table 1 shows the choices respondents made in the two scenarios. When offered, the print-only
subscription gets no buyers, so it’s an apparently useless offer. Yet its presence has a signifi cant effect on the choices buyers actually make. Offer this ‘useless’
TABLE 1: ECONOMIST SUBSCRIPTION OPTIONS
Subscription package Online-only – US$59
Print-only – US$125 Both – US$125
Scenario 1: % of those taking each offer Scenario 2: % of those taking each offer 68%
Not offered 32%
option and fi ve in six will trade up and buy the bundle. Remove it as an individual option and the proportion of people who buy the bundle falls to two in six. That’s a loss of US$66 for every potential subscriber who chooses the online-only option. Put another way, for every 100 subscribers, the presence of an option that’s never actually purchased means The Economist would take an additional US$3,432. It’s clear the seller can, to an extent, affect the choices we make by controlling the environment in which we make those choices.
USER-FRIENDLY PRICING It’s better to be as simple and clear as possible with price. Have a fi nite number of options and don’t keep changing them. Create bundles that contain mixes of the important factors for your market, in ways that are easily understood. See if your mother could easily work out which rate she would like to be on, and whether you can
– realistically – justify all elements. Joining fees could come into this
bracket: how do you justify them? Does it cover an induction? If so, all well and good, but if it’s for pressing a few buttons on the keyboard it will be harder to keep in place.
48 Read Health Club Management online at
healthclubmanagement.co.uk/digital
16% 0%
84% One option might be higher value
bundles that allow people to move across services and sites through their membership period – eg drop the pool as I’m not using it, add sauna as I benefi t from that, take a multi-site membership for a month as I’m moving around (and let me do that from the place I’ve come to as well as from my regular gym). And don’t necessarily drop an option
just because nobody buys it – this could be the key package that trades members into higher value options. ●
ABOUT THE AUTHOR Tim Baker is chair of Touchstone Partners, a leading research consultancy in the leisure, consumer and shopper sectors. Touchstone Partners’ core expertise is in market exploration (to identify opportunities), pricing, brand equity and proposition development. E:
tim@touchstonepartners.co.uk T: +44 1865 261442 T: +44 7710 633211
www.touchstonepartners.co.uk
June 2015 © Cybertrek 2015
WWW.SHUTTERSTOCK.COM
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