The Invaluable $1.80 Beer Lesson On Selling Products And Buying Habits

You think you like the option that's neither cheapest nor most expensive because you're a reasonable person. But the real reason may surprise you.

Products often come in threes: budget, middle, premium.

Why? As Priceonomics writer Alex Mayyasi observes, while you'd like to think your decisions arrive after scrupulously comparing cost to quality, you're probably just scanning what's immediately available.

"People often have a preference for the middle option, irrespective of quality or price," Mayyasi writes. "Although we tend to think of ourselves as making decisions by comparing the cost of a product to its quality (or our willingness to pay), we don’t always do so in practice."

To illustrate this, he takes a beery example, lifting from the book Priceless.

The great beer experiment

People were offered two beers--a premium one at $2.50 and a bargain beer for $1.80. What did they select? About 80% chose the more expensive one.

In the next experiment, an even cheaper option joined the first two--a beer for just $1.60. The result? 80 percent of people nabbed what became the middle option--at $1.80--and the rest bought the $2.50 offering.

Then the third take happened: The $1.60 beer was switched out for one of those ultra-premium offerings at a cool $3.40. Again, buyer behavior changed: Most people chose the $2.50 option, relatively few chose the low-cost $1.80 option, and about 10% nabbed the most expensive option.

So what was happening? Shifting the options influenced buyer behavior.

The experiment confirms an old sales heuristic: If you offer different price points, people will choose between the plans rather than whether to buy the product or not. Of course, the cognitive overhead incurred by inundating people with information could backfire.

The applications

The most obvious application would be to incorporate the three-way price plan into your product if you haven't already--although the Evernote-style freemium model has shown a lot of success, as well as WhatsApp's ultrasimple pricing. But more fun than that is to use the strategy on your friends and colleagues.

Let's take from Mayyasi's deliciously devilish plan for dining manipulation. Say you want to grab lunch with your work BFF, but you don't want to boss them into going to your favorite Cuban place--you'd rather allow them to arrive to that decision on their own.

To do that, Mayyasi recommends pulling up Yelp and suggesting three lunch spots: cheap and average Italian, reasonably priced and conveniently located Cuban, or distant and expensive Chinese. So instead of contemplating the worthiness of Cuban in and of itself, your BFF is comparing it to the crap Italian and the too-fancy Chinese, which should tip the lunch scales in your favor--if that beer experiment was any indication.

The Salesman’s Guide To Manipulating Your Friends

[Image: Flickr user Ian Sane]

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1 Comments

  • Sean

    This is interesting. Being a beer consumer I admit that I go for the middle ground... I go right past the crap lite, bypass the ultra-expensive bombers, and head for the mid-priced Sam Adams (or similar regional brands). 

    However, I am an experienced beer consumer so I already know I don't like the cheap brands, that the better brands (i.e. the Sam Adams) are a much better value - I am paying a little more but getting a much better beer so it's actually a better value for my beer dollar.  I've had a few of the very expensive brands and while they are good and interesting to try they're not that much better so the value starts to go back down.

    I guess the only other thing I would like to know is if this was a blind taste test or if the participants knew which brands they were purchasing.