Expand Your Audience with Tiered Pricing and the Goldilocks Principle

Keith Perhac
Founder @ SegMetrics

When you’re hungry, you don’t always want to eat the same thing. Sometimes you crave a fancy, five-star dining experience. Sometimes, you want something small, like a salad or a slice of pizza. And other times, you want something in the middle – a nice, normal meal.

The same concept applies to your product offering. Sometimes your customers want a white glove VIP experience. Sometimes, they want something small, like a “light” or “intro” version of your product. And other times, they want something in the middle – your standard product.

This is called The Goldilocks Principle. Remember how Goldilocks tried out all of the bears’ beds? One bed was too hard, one bed was too soft, and one bed was “just right.”

It helps to think of your products this way. Some of your customers want something big, some want something small, some want something in the middle. It’s up to you as the product creator to make sure you have multiple offerings that feel “just right” for your customers’ unique needs. You want to create a win-win-win situation.

If you pay attention, you see this concept all around you every day. Think of the last software subscription that you purchased – you probably had to decide whether you wanted to buy a starter version, a standard version, or a premium version. That’s Goldilocks in action, and it’s a best practice in just about any industry.

The big question you’re probably asking is – why do this? Isn’t one product enough? Why bother going through the effort of transforming one offer into three offers?

There are a couple of solid reasons to “go Goldilocks.” First, it expands your potential customer base.

Imagine if you had a furniture store, and you sold million-dollar couches. Your customer base would be pretty small, right? And your customers would only buy a new couch every 5-10 years, because couches tend to last a while.

To increase your customer base, you decide to offer a more affordable version of the million-dollar couch. Suddenly, you’ve opened up your business to more buyers. Even though they’re paying less than your original customers, you’re selling more than before. And once you’ve snagged those new customers, you can work on creating a long-term relationship with them. Maybe they’ll come back to buy a lamp or a coffee table, or, one day, they’ll decide to upgrade to the million-dollar couch.

The Goldilocks Principle also helps you land high-paying customers who are looking for increased value.

Imagine you own a garden store that sells bushes, trees and shrubs. You mostly sell to DIYers and weekend warriors who are looking for affordable prices and a wide selection of products. They come in, buy the plants they want, and leave. This is the extent of your business.

You decide to offer more VIP services to grow your profits. You begin doing custom landscape design and consulting. You set up a same-day delivery service. You offer professional landscaping installation.

Your original customer base of gardening DIYers transforms when you start offering these new services. You find yourself with new, high-paying clients who want the best of the best for their yard, and are willing to shell out big bucks for it. Over time, you double your customer base and quadruple your revenue.

The same idea applies to your online product.

And this doesn’t mean you need to go through the effort of creating lots of drastically different products to sell. Not at all! What you have to do is put on your “strategy hat” and your “product manager hat” to help you understand the kind of value your customers want.

It helps to think of your product line like a set of nesting dolls. They all look nearly the same, except for their size. Your most premium product is the biggest nesting doll – it encompasses everything you have to offer. Your standard product is right in the middle. And your lowest-tier product is the smallest nesting doll. Here is an example:

    8 Weeks of Video LessonsXXX
    MP3 Audio RecordingsXXX
    Course WorkbooksXXX
    Expert InterviewsXX
    Private Facebook GroupXX
    Live Q & AXX
    Group CoachingX
    One on One Case ReviewX

Here’s how to translate your product into three products:

  1. You already have your main product, and that becomes your standard offer.
  2. To create a light version, you streamline or cut down some of that content. Think hard about what your customers need at this level. Just the basic information? A course they can complete in one day? Shorter, easier homework material?
  3. To create your premium version, you add value. This can include things like bonus video content, one-on-one consulting with you, or access to forum discussions. That’s just to start. You can probably think of a dozen ways to add value that your customers would love.

When you create different versions of your product, don’t forget to price them accordingly. Your smallest product will be the most affordable, and your biggest product will be the most expensive. This is called tiered pricing, and the Goldilocks Principle can’t work without it.

Here’s an example. Let’s say your main product is a productivity course called “Masterful Productivity.” Through a series of video lessons and homework assignments over two and a half weeks, you teach your students how to make better use of their time. You charge $279 for this course.

Now, you want to go Goldilocks to increase your customer base and land more high-paying customers.

To create your light version, you decide to reduce the time it takes to complete the course. Customers who buy this version will get the five best lessons of the main product over five days. You decide to call this version “Masterful Productivity Express.” You charge $79 for it.

To create your premium version, you decide to add a package of bonus videos that feature you interviewing productivity experts who share their best advice. Customers can have an hour long one-on-one consult with you to discuss their new productivity plan. You also offer them three time-saving worksheets that the other tiers don’t receive. You call this version “Masterful Productivity Expert.” You charge $579.

With these changes made, you can expect to see more customers coming in through your lower-priced product, and increased profits from your higher-priced product. And you’re still offering your main product to keep those baseline customers happy. The Goldilocks Principle is a win-win-win situation.

Now it’s your turn.

Think about your main product and how you can transform it into three tiers. What do you plan to offer in your lower-priced tier? What value do you plan to add to your higher-priced tier? What will make your customers feel “just right”?

Keith Perhac

Founder @ SegMetrics

Keith is the Founder of SegMetrics, and has spent the last decade working on optimizing marketing funnels and nurture campaigns.

SegMetrics was born out of a frustration with how impossibly hard it is to pull trustworthy, complete and actionable data out of his client's marketing tools.

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