The Importance of Framing in Price and Value Proposition


One of the most important things for any marketer (or anyone with an “offer” for that matter) is to consider just how the value of their product is perceived by a potential consumer.

When we’re selling a product, price is always a question – and the way we price our products and services is a combination of the cost of what it took to produce it, along with a perceived value. That perceived value in many instances, such as to “commodity” type products (items available through multiple retailers, like Nike shoes or Pampers diapers) price is usually mostly perceived as in relation to other products in the category, and we price as such. Of course we can work on our value proposition to try to allow for some price differences through features and benefits (an organic cotton diaper obviously has a different value proposition than Pampers, for example).

This concept is often referred to as “framing” – how the price of your offer is presented, in particular in relation to other options.

But when it comes to a specific, unique product or service that you offer, and we don’t have specific “competitive product” to price against, this becomes much more nebulous. And it’s in these instances that remaining conscious of our “framing” can be most important.

Recently I’ve been working on a project to relaunch and improve sell-through of a subscription-model based offering. It’s not the core business, but it’s an essential part of the overall business, and ties in very closely with the brand’s loyalty and customer lifetime value goals.

As part of this re-launch, a major goal was to allow for recurring billing to be in place for the customer. It was replacing a previous version of the product that was a yearly membership, but paid up front then manually renewed each year. This new offer would bill automatically and be available at either a monthly for yearly membership (with yearly at a discount vs. the monthly price).

Like any other new product launch, there were obviously cost analyses and market research to take into account for the specific offer – but what was most important in the success of the launch was the conscious framing of the offer.

With two offers the first question you’ll usually run into is this: Which offer do we promote?

When there isn’t a specific desire to have people take one offer vs. the other, and overall sell-through based on volume is the most important, the best way to figure out what offer is best is to test. And so we did.

Based on our tests, we found a clear winner. And we pushed that winner.

But the next question was what happens if we offer both options at once and let the customer choose?

The concern going into this was the issue of potential distraction or decision paralysis (a topic covered wonderfully in Barry Schwartz’s ‘The Paradox of Choice’.) What if the customer can’t make a choice and then just abandons to consider their options (never to return)?

Going into this though, we also had the idea of framing in mind. The thought was this: if you offer two different prices, and one is a clear value over the other, can you actually increase volume by offering both? In other words, we “frame” the two offers against each other so that one looks clearly to be a better value than the other. (Check out the section on “decoy pricing” in this article for more, and how it can have additional benefits in your offer psychology).

What happens when you do this is you make that original question in the customer’s head of “is this worth buying?” become a secondary concern. Instead, now the customer is looking at the two offers in front of them, and assuming there is some value in the actual product or service, their question now becomes “which of these is the better offer?”

The results in situations like this can be stunning. Research has shown that in most instances like this you get a better overall conversion rate when you frame one offer against another, giving what was once nebulous a kind of anchor point against which to make a decision.

For another example, think of any discount retailer. Their entire business model is based on framing. That’s why they put the “compare at” price on every tag along with their price. That “compare at” price frames what the product is “worth” and then instills a much higher value for the “discount price.” I guarantee that without those “compare at” prices, their sell-through rates would decrease.

Obviously this idea of “pay monthly for X or pay yearly for Y (A SAVINGS OF Z!)” is a common practice. But it’s important to understand why. While there are other concerns like churn rate that you have to take into account for maximizing profit, if the general conversion or lead is goal, removing the question of overall value to focus on relative value in your proposition can work wonders.

For more detailed discussion on how pricing, framing and psychology all play into one another, I also recommend you buy the following two books. Both are absolutely essential reading, in my opinion.

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