Decisions are rarely made in a vacuum and as a result the order in which options and choices are offered becomes important. Regular readers of the Inside Influence Report will be familiar with the phenomenon of perceptual contrast - the idea that you can change someone’s perception of an offer not by changing the offer at all, but instead by changing what they experience immediately before you present your offer (Cialdini, 2009). A $25 wine seems expensive if it appears halfway down a list that begins with a house wine priced, at say, $10. However that same $25 wine will appear more reasonably priced if the options on the list are reversed and start with a $50 wine first. Nothing changes about the wines, just the order in which they are presented.
However, rather than just single items, products and services will often be made up of a package of multiple items. For example a movie theatre might offer customers the option to watch 15 movies for $99. A lawyer may offer 10 hours of consulting time for $2500. An online music retailer might charge $29 to download 70 songs.
In such situations does the order in which the price and number of items is presented actually matter? And if it does, what might be the implications for your influence attempts?
Whether it is supermarkets selling 12 cans of soup for $10 or a newspaper marketing monthly or annual subscription rates, package pricing is increasingly employed in both online and offline market places. When it comes to structuring how packages are offered, three major features might be altered in an offer without actually changing the offer. Each of these changes has the potential to influence a customer’s or consumer’s decision.
The first feature concerns price / item order. For example a movie theatre might present potential customers with an offer to watch “15 movies for $99”. Alternatively they could frame their offer as “$99 for 15 movies”.
The second feature concerns changing the size of the package on offer. A lawyer could offer a client a larger package, for example 10 hours of consultancy time for $2500 or alternatively a smaller package of 2 hours for $500.
The third feature concerns the difficulty in calculating potential offers. On the fly, $29 for 70 songs is arguably harder to calculate on a per unit basis than say $20 for 50 songs even though there is only a penny per unit difference.
Marketing researchers Rajesh Bagchi and Derick Davis from the Pamplin School of Business at Virginia Tech University conducted a series of three studies looking at the influence that order, size and calculation effects have on decision making.
In one set of studies participants were randomly assigned to different groups and asked to consider a series of offers made by a web based television broadcaster. Some groups received ‘price-first item- second’ offers ($300 for 600 hours of TV) whilst others received item-first price-second offers (600 hours of TV for $300).
Additionally some groups received offers where the packages varied in size (600 hours for $300 or 60 hours for $30). Finally some groups received offers where the difficulty in calculating the offer was varied. For example one group received an offer of 600 hours for $300 and others 580 hours for $285.90 meaning that the relative cost per hour was $.50c v. $.49c.
All the study participants were asked to indicate how good a deal they thought they had been offered, the value for money it represented and, most importantly, how likely they were to make a purchase.
The resulting analysis showed that when an offer was easy to calculate people rated that offer as better value and were more likely to trial it when it was presented in the order ‘price-first item-second’. This was true regardless of whether the packages were small ones ($30 for 60 hours) or large ($300 for 600 hours).
However when an offer was more difficult to calculate and the package offered was large then the reverse was true. People were more likely to prefer and trial the ‘58 hours for $289.50’ offer compared to the ‘$289.50 for 58 hours’ offer. Interestingly this reversal effect didn’t occur in the small package condition.
In summary, Bagchi and Davis’s findings contribute further to the idea that when offered a choice people will typically anchor on the first piece of information presented to them and adjust (sometimes insufficiently) for the second piece of information that follows. Furthermore this effect is amplified the more difficult it becomes to calculate the offer, leading to different evaluations and preferences for what are essentially the same things.
In their concluding remarks the authors offer a practical and potentially useful lesson for those of us in business whether we are managers, consultants, marketers or salespeople. To think that clients and customers judge larger packages and offers as a better deal irrespective of how the price order is presented is a misconception.
Imagine for example that you are putting together a proposal for a client to supply a range of consultancy services over a period of time. Imagine further that your proposal is quite complex involving multiple people delivering a variety of services at different rates. In such situations the results of these studies suggest it would be particularly important to lead with a ‘item-first price-second’ approach especially in the early stages of your proposal.
However for businesses whose offers are much easier to calculate or where offers involve smaller numbers of units or products then the results suggest it will be more effective to present your offer in terms of ‘price first – item second’.
As a result there will be certain situations in your influence attempts when what currently comes first, maybe should go second.
Aside from price which other contexts are especially appropriate to consider contrast or ordering effects?
What examples of ordering effects have you employed or have seen employed that have been both ethical and effective?
Bagchi, R. and Davis, D.F. $29 for 70 items or 70 items for $29? How Presentation Order Affects Package Perceptions. Journal of Consumer Research (forthcoming). Electronically published August 18, 2011.
Cialdini, R. B. (2009). Influence: Science and Practice (5th ed.). Boston: Allyn & Bacon.