A Simple Psychological Trick That Increases Average Sale Price

by 15 12/22/2011

Are you happy with your average sales price?

Do you feel that you’re employing every tactic available to close deals and sell at higher prices?

Or at an even more basic level, are you happy with your sales volume in general?

Most successful business owners I meet are somewhat adept at pricing, negotiating, and closing deals. Yet very few of them are aware of a simple, time tested sales technique called “Rejection-Then-Retreat” (also referred to as the “larger-then-smaller-request strategy”).

In Robert Cialdini’s classic book titled Influence, he describes in length how the “rejection-then-retreat” technique can be used to systematically present options to clients/customers in a way that will consistently result in higher sales.

To hammer home the effectiveness of this technique, Cialdini cites a powerful study from a report in Sales Management magazine, reprinted in the January 1975 Consumer Reports:

“If you were a billiard–table dealer, which would you advertise – the $329 model or the $3,000 model? The chances are you would promote the low-priced item and hope to trade the customer up when he comes to buy. But G. Warren Kelley, new business promotion manager at Brunswick, says you could be wrong….To prove his point, Kelley has actual sales figures from a representative store….During the first week, customers … were shown the low end of the line … and then encouraged to consider more expensive models – the traditional trading-up approach…. The average table sale that week was $550….However, during the second week, customers…were led instantly to a $3,000 table, regardless of what they wanted to see…and then allowed to shop the rest of the line, in declining order of price and quality. The result of selling down was an average sale of over $1,000.”

How Non-Retail Businesses Can Put This To Use

The implications here are exciting, and not just for retail businesses. These lessons apply to converting online sales at a higher rate, and at a higher price.

Notice how the New York Times offers it’s most expensive subscription option first and “retreats” from there.

New York Times Pricing Strategy

Here’s what it boils down to: Average sale prices may be higher when you employ “selling down” strategies as opposed to “selling up.”

By starting with your highest price point products first, people are more likely to end up somewhere in the middle. Conversely, by starting your selling process at the low end, you are more likely to end up with average sales prices that are near the low end.

This is powerful stuff. Again, don’t think you can’t employ these strategies just because you aren’t a retail business.

Nearly every business has opportunities to exploit this powerful technique. Consider how you present your product or service offerings on your site. Do you offer your options at once, all lined up in a row? Could you adjust the way you present your options and pricing to first display your highest-price services or products?

Notice how 37 Signals shows you from left to right, the highest priced item first followed by a feature of the mid-range price:

Basecamp Pricing Strategy

Adjust Your Sales Copy to Work Prospects From High to Low

Even if you aren’t selling face-to-face, you can employ these strategies in the way your sales copy flows and leads the prospect through your products or services. Most prospects may not purchase your most expensive products or services. But by first offering them the highest price products, you condition them to be more comfortable with some of your more moderate pricing.

If you only have one offering for customers to select, this strategy is equally as powerful. Consider creating a couple more options with some extra bells and whistles. Even if you never sell them, the existence of higher price options will increase your conversion of more moderately priced products and services.

What you’re doing is conditioning the prospect to the existence of a higher price option, which then psychologically makes them more amenable to your mid-level and lower priced products and services.

Systematically organizing your offerings to achieve these effects is almost certain to increase average sales price, total sales, and profitability.

About 

Josh Turner is a leading expert on leveraging LinkedIn to grow your business and has helped clients generate sales as high as $3 million. Josh is the founder of Linked Selling, a B2B marketing firm specializing in fully outsourced LinkedIn marketing and lead generation campaigns. His company represents clients in the US, UK and Australia, in a wide variety of industries. Josh's company also operates LinkedUniversity.com, an online training program for LinkedIn marketing and sales. He has been featured in the Huffington Post, Miami Herald, and many more national publications as a recognized leading expert on LinkedIn.

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15 COMMENTS

Jason Stone

Very interesting, Josh. I thought you’d be talking about the old $.99 trick, so I was happy to see this instead. I hadn’t come across the technique before. Always happy to be steered to learning something new.

December 22, 2011 Reply

    Josh Turner

    Thanks Jason. Glad you enjoyed it! Wait, is the $.99 trick the same as the $.97 trick? ;)

    December 22, 2011 Reply

Jason

This is interesting and relates to another article I recently read by Adam D. Galinsky an assistant professor at Northwestern University’s Kellogg Graduate School of Management, that states the person who sets the “anchor” in the negotiation is more likely to get a higher price than waiting. The anchor acts as the baseline to form the negotiation. In this case, by showing the price of the higher item, it sets a mental anchor with the customer where they are then more comfortable with a higher price than when they arrived, having the anchor set higher than lower.

December 22, 2011 Reply

    Josh Turner

    Very cool stuff Jason. Thanks for sharing this, definitely something sales people and copy writers should be taking note of.

    December 22, 2011 Reply

    Russ Henneberry

    Never thought of it that way Jason but I do remember learning that “anchor principal” in business school.

    December 22, 2011 Reply

    Mike Jarema

    Predictably Irrational has some good coverage of the anchor price idea. It blew my mind then, and it’s great to see examples like these which are immediately relevant to me.

    SaaS product managers – time to run some quick A-B tests!

    January 5, 2012 Reply

Dale

Quite interesting, but it would of been better to see some information on the effect on conversion rates as opposed to just average sale price.

December 22, 2011 Reply

@kWIQly

Josh Great read thanks – will be sure to use for our new prod launch at Kwiqly but a question..

I once read that we often select the right hand tick box in a poll (all other variables eliminated) – does this not have an influence here.

Thanks for your time

December 26, 2011 Reply

Olivier Gourment

Ok this may be a dumb question, but did the averages sales price consider the number of sales? Selling up might attract more potential customers, resulting in a higher final sales figure, but lower price average (more customers), while selling down may mean higher average price but lower total sales figure??

January 5, 2012 Reply

Chris Thomas

It sounds very similar to the way airlines lead you through the first class or business class section – on the way to economy – when you board a flight. As you walk past, you get kind of envious that you’re missing out. Pretty smart passive marketing.

January 23, 2012 Reply

Simon

Great article! Your right! Pricing tables usually go from low value to high value. Maybe time to try something new!

October 3, 2012 Reply

    Josh Turner

    Thanks Simon. You’re absolutely right, most people go from low to high. Missed opportunity? Maybe so.

    October 3, 2012 Reply

Craig Ronaldson

Great article you have here, really enjoyed some the tips and information that you made avaliable. Can’t wait to see what you post next, keep up the great work!

January 18, 2014 Reply


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