Good–better–best
Good–better–best, also known as Goldilocks pricing, is a type of
Consumer behavior
The "good" option is typically a basic,
Companies selling a particular good had traditionally relied on a demand curve to identify an ideal price. This created a Catch-22 in which a good with only one price would exclude buyers who would not pay the single price, and it would also sacrifice profits if a less price sensitive customer were able to pay more for a premium version.[2] In addition, a lower-priced good can generate additional ancillary revenue for the seller through further revenue streams; for example, in 2018, an iPhone SE cost about one-third as much as Apple's flagship iPhone X did, but Apple could continue to sell content, services, and accessories to a buyer of the less expensive phone.[1]
Good–better–best pricing takes advantage of consumers'
Examples
At bars, customers often have a choice between
Economy class air travel, long considered a single class of service, has been diversified into basic economy class, economy class, and premium economy class. Airlines have found that over 50% of consumers who start at a lower price end up upgrading to a higher price.[8]
Some companies have quietly increased consumer prices by lowering prices on basic models while simultaneously introducing new, premium models at higher prices. For example, Peloton Interactive lowered the price of its basic stationary bicycle from $2,245 to $1,895, and also introduced a new premium bike for $2,495.[9] One jewelry sales consultant advised retailers introducing good–better–best pricing to set their "better" price about 10% higher than a product's average sales price, with "good" prices about 25% lower, and "best" prices no more than 50% higher.[10]
Risks
A common pitfall of good–better–best is
Some sales professionals discourage a good–better–best strategy for being non-specific and non-targeted to a particular customer, instead recommending that salespeople select and offer one pricing tier based on the customer's needs.
References
- ^ a b c d Mohammed, Rafi (September 1, 2018). "The Good-Better-Best Approach to Pricing". Harvard Business Review. Retrieved June 8, 2023.
- ^ Mohammed, Rafi (February 8, 2013). "Why Good-Better-Best Prices Are So Effective". Harvard Business Review. Retrieved June 8, 2023.
- ISBN 9781429943932.
- ^ a b Manfer, Sam (April 6, 2010). "Good, Better, Best". Biz-Blog@SalesVantage. Archived from the original on April 26, 2010. Retrieved April 6, 2010.
- ^ Duff, Mike (April 8, 2009). "Sears, J.C. Penney Launch Post-Martha Home Collections". BNET. Archived from the original on April 11, 2009. Retrieved April 6, 2010.
- ^ Dholakia, Utpal (February 16, 2016). "What Consumers Should Know About Good-Better-Best Pricing". Psychology Today. Retrieved June 8, 2023.
- ^ Wohl, Jessica (March 8, 2013). "Towels, spicy carrots at front of latest consumer products push". Reuters. Retrieved June 8, 2023.
- ^ Nickisch, Curt (July 7, 2020). "Pricing Strategies for Uncertain Times". Harvard Business Review. Retrieved June 8, 2023.
- ^ Dholakia, Utpal (November 21, 2021). "How Companies Raise Prices Without Raising Prices". The Wall Street Journal. Retrieved June 8, 2023.
- ^ Johnson, Larry (April 24, 2019). "3 Simple Ways a "Good-Better-Best" Display Can Make You More Money". Instore Magazine. Retrieved June 9, 2023.
- ^ Bertini, Marco; Wathieu, Luc. "How to Stop Customers from Fixating on Price". Harvard Business Review. No. May 2010. Retrieved June 8, 2023.