One of the most difficult tasks when creating membership sites isn't deciding what membership software to use or creating your content… it's setting your prices. Why? Because pricing has much more to do with consumer psychology than anything else.
At first glance, setting prices seems pretty straightforward. But after a closer look, it’s easy to see that pricing psychology is a very complex subject with entire books devoted to the topic. Of course, using a great WordPress membership plugin will help alleviate some of the pain of pricing by giving you some flexibility, but even the best membership software can't help you figure out what's in the mind of your customers.
This week and next week we’ve got some different outcomes to take into account when determining the best price for your membership site offerings. Here’s the first one:
The Anchoring Effect
The anchoring effect (sometimes also called price framing) is a fundamental and well-documented way that human beings make decisions about how much they are willing to pay for something. You might think that your reasoning for paying for a product or service is based in logic, but really you and most other humans base this decision on comparisons.
A great example of this phenomenon can be found in a recent experiment conducted by BBC Horizon:
A researcher went to a well-trafficked park and asked people to estimate the price of a bottle of wine. Before the estimation, they were asked to pull a ping pong ball out of a bag with their eyes closed. The participants were told that each ball in the bag had a number between 1 and 100 written on it, but in reality, there was only one number written on each. The experiment was conducted twice with two different groups of participants.
The first group of people drew a ping pong ball with the number 10 written on it and the second group saw a 65 on the ball. After they'd seen the ball, the participants were asked to approximate the cost of the bottle of wine. The first group estimated the cost to be between $10 and $30, while the second group guessed much higher, between $40 and $100.
So what does this mean for your business? Well, your customers are likely to arrive at your site with a price range already in mind from shopping around the web and visiting competitors’ sites. However, this doesn’t necessarily mean that you need to match or beat your competitors’ prices. It’s just something to take into consideration and be aware of when setting your own prices.
Depending on your unique offerings, your price can (and very well might) be drastically different from that of your competition — you just need to properly and prominently explain the value of your offering on your site.
For instance, if you're the only company offering basket weaving materials along with your basket weaving course, you could frame your price against the industry standard price (where your competitors stand), add the price of course materials, and insert a quick note about the typical value of such an offer to entice potential customers. Highlighting discounts is a great way to incentivize purchases.
Another place where the anchoring effect can make a difference is in getting people to buy one of your mid-range offerings.
Say you had two different program levels for your basket weaving business, Bronze ($15) and Silver ($80), but you weren’t getting many sales for the Silver package. By adding a third option that is priced much higher, e.g. a Gold package for $500, you frame the Silver package as the best deal and consequentially drive more sales towards the mid-range offering.
For a couple of great reads on the anchoring effect check out the following articles in Psychology Today and You Are Not So Smart.
Remember that pricing can be complex and there's no foolproof method for selecting the right price for your membership site.
However, we’ve got eight more great considerations to share with you, so be sure to read part 2 of this informative series on how to price your membership site subscription!
Read the next article in this series: How to Price Memberships (Part 2): 4 Important Insights