Add an Expensive Product to Catalogs

Every price is relative.

Customers evaluate the size of prices by comparing them to a visible range (Janiszewski & Lichtenstein, 1999).

For example, a $10 gadget can be viewed differently:

• Cheap in a range from $8 to $15
• Meh in a range from $5 to $15
• Expensive in a range from $5 to $12

Same price. Different perceptions.

Can't lower your price? Try raising the highest pice in your range.

Customers prefer:

• A $50 ribeye near a $200 wine
• A $200 projector near a $5,000 projector
• A $5,000 proposal near a $25,000 proposal

In a catalog of 8 cameras from $50—$75, customers were willing to spend more when they saw a $600 camera (Krishna et al., 2006).

Requirement: Multiple Products

Be careful if you sell variations of a single product (e.g., SaaS plans).

Customers engage in two types of processing:

• Discrimination - Evaluating differences
• Generalization - Evaluating a summarized view

Oftentimes, a single product triggers generalization.

Why does that matter? Because it reverses the recommendation. Raising the highest pice would backfire for customers with a summarized view because the average price would now be higher (Cunha Jr & Shulman, 2011).

Adapt your approach based on this mindset:

• Discrimination? Raise the endpoints of your prices (e.g., raise bottom, raise top)
• Generalization? Lower the mean of your prices (e.g., lower bottom, add cheaper items).

How to Apply

• Delay Expensive Products for New Customers. Existing customers should prefer a $65 shirt near a $300 shirt. But new customers will be assessing your overall store image upon their first exposure. In this summary mindset, a $300 shirt would make all prices (including a $65 shirt) seem more expensive.
• Add a Small or Free SaaS Tier. Software is usually a single platform (thus a summary mindset). Try lowering the mean of your prices by adding a cheap plan so that all plans seem cheaper.
• Raise the Upper Limit of Price Sliders. You might provide a UI slider for customers to choose their price (e.g., donation, bonus, auction bid). With a range from $0 to $100, the midpoint is $50. But if you raise the upper limit to $200, the midpoint (and inferred social norm) is now $100 (Thomas & Kyung, 2019).

Related Applications

• Expand Ranked Lists. Are you ranked #2 in your Top 5 competitors? Well, why not include 50 competitors? Or 100 competitors? You just moved from the top 40% to the top 2% without any effort (Xie et al., 2024).

• Cunha Jr, M., & Shulman, J. D. (2011). Assimilation and contrast in price evaluations. Journal of Consumer Research, 37(5), 822-835.
• Janiszewski, C., & Lichtenstein, D. R. (1999). A range theory account of price perception. Journal of consumer Research, 25(4), 353-368.
• Krishna, A., Wagner, M., Yoon, C., & Adaval, R. (2006). Effects of extreme-priced products on consumer reservation prices. Journal of Consumer Psychology, 16(2), 176-190.
• Thomas, M., & Kyung, E. J. (2019). Slider scale or text box: how response format shapes responses. Journal of Consumer Research, 45(6), 1274-1293.
• Xie, V., Cai, F., & Bagchi, R. (2024). EXPRESS: The Rank Length Effect. Journal of Marketing Research, 00222437241268439.