Whether you are a low tech business like a hair salon or a super awesome tech startup, whether you are a large established enterprise or a startup disrupting status quo you likely seen this problem (or have not done enough data collection to realize you have this problem):
You offer your customers a choice of three (to five) product versions at different price points allowing your customers to self select. You expect customers pick the version that is right for them. But when you do the revenue analysis you find to your dismay that your customers are overwhelmingly choosing the cheaper (if not the cheapest) product version.
You likely are thinking whether your pricing page design is wrong, it lacks specific nudges or you need more A/B split testing. But all that are red-herrings compared to the true underlying situation.
There are two significant ill-effects from a scenario where your customers are choosing the wrong cheaper version. First you miss out on price realization – since your profits are going to be higher with Plus and Premium versions it affects even more. Second you are doing a disservice to your customers because you are not enabling them get better value and grow their business by utilizing Plus or Premium version.
That is correct I said you are doing a disservice to your customers when then don’t choose the right version for their business. When a customer understands the value and selects the right product version both you and your customers win. There is more value created to be shared between you two. On the flip side when your customers do not understand the value they get from your versions and choose based only on price they miss out and you suffer.
To take it to extreme, it is like you offer a third class train car with no roof and second class with roof but your customers didn’t know the value from a second class car. So even though they would have preferred to pay premium to travel comfortably with a roof over their head they chose your Basic third class car because of your failure to communicate value.
When customers do not understand the value messaging of your offerings they end up choosing just on price while they would have happily paid more for better options. No one benefits from this situation.
When designing multiple versions – Basic, Plus and Premium – do not just cobble together a set of levers and levels and hope your customers will understand. If you have not done the value allocation correctly across versions and made that value difference clear to your customers, no amount of pricing page design excellence will help you fix the mess.