“How to double your profits by selling a product nobody buys, or how one business owner increased revenues by 20% with a crayon.”

If you want to make more money during a recession, should you raise your prices?  To understand the answer to that question, first I have to tell you about my shoes.

On my way to the Catersource Event Solutions conference and tradeshow last week, I stopped off at the shoeshine stand in JFK Airport.  On a handmade cardboard sign, they offered a choice of shines at $7, $9 and $11. I thought about it.  My shoes were scuffed, and I had time to kill before my flight. But which shine? I’d hate to get to Las Vegas and realize the cheap shine didn’t last. But I wasn’t going to fall for some silly $11 shine. I asked for the $9 option.  I felt I was making a rational decision, but little did I realize that I was just zapped by a sales trigger called “contrast.”

I asked the shoeshine about the sign. He told me that he used to just offer a choice between a $7 and a $9 shine.  When he only had two choices, most chose the cheaper price, as might be expected.

Then one day, he got an idea from a friend in the restaurant business. The restaurant owner discovered that when his most expensive wine was $80 a bottle, most customers bought a $30 bottle. However, when he added a $300 bottle of wine to his wine list, he started selling more $40 bottles. He never sold a $300 bottle, but its very existence created a price point in his customer’s minds. It seems people don’t want to go broke, but then again, they’re afraid of looking cheap. Typically, the next to cheapest wine on a wine list is often the best seller.

So the shoeshine gave it a try. He scrawled “Bullet-proof shine – $11,” above the “$9 Deluxe” and “$7 Basic.” Within the hour, he knew he was on to something. Suddenly, more and more customers were buying his mid-price offer. When he added an ultra-premium price of $11, he saw most customers choose the $9 price instead of $7. His revenue increased by 20% in the first week and his profits doubled.

Goldilocks Pricing

“This one is too cheap. This one is too expensive. But this one is just right.”

I shared this example of Goldilocks Pricing with my catering clients. The majority of social event shoppers have very little experience at hiring caterers. Most consumers in the social market will only plan a handful of big parties in their entire lives. Inexperience, combined with the emotional stress of planning a big event, often encourages automatic, emotion-based reasoning. The buyer will select what seems to be the best choice based on a gut feeling – when that feeling can be rationalized.

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Customers need to convince themselves they are making a deliberate and logical choice based on sufficient information. That’s why I advise offering at least three drastically different  price points; one exorbitantly priced offer, one cheapo and one that’s just right. The high and low prices give buyers a benchmark and a sense of choice and control. If you do not give them an adequate amount of choice, you compel them to seek it from your competition. They’ll be less likely to continue searching for bids if you give them enough choices.

Offer your clients a limited number of drastically different choices. Don’t overwhelm them with a myriad of choices that have only minor differences. Make sure each offer is clearly defined. Clients want to be able to make a decision easily. By offering them three drastically different options, they’ll talk themselves into the mid-tier range most of the time.

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