How many times have you been asked the above question at your local wine store?
"Huh?" you say.... okay, so maybe you weren't asked the question explicitly... instead it was embedded in the array of differently priced wines displayed throughout the shop.
For those of you who, like me, know little about wine, when was the last time you went into a wine store and bought the cheapest wine on the shelf? When was the last time you bought the most expensive wine on the shelf? My guess is that most of you can't recall the last time you did either because when you go to the wine store you "play it safe" and usually buy a wine priced "somewhere in the middle". I know I do.
Little did you realize that your local wine store was employing a product-sandwich strategy, drawing you helplessly towards that mid-priced bottle of wine! And you thought you were in control! :)
What is a Product-Sandwich Strategy?
In a nutshell, the strategy involves creating/selling a (very) high-priced version of your product so that the next price down appears more moderate in comparison. Often times this "next price down" would be considered expensive by the customer in absolute terms, but in relative terms (i.e., next to your "Rolls Royce" model) it appears reasonably priced. If implemented successfully, the net impact on your business is a boon in sales of the mid-priced version.
Why does the Product-Sandwich Strategy work?
The Product-Sandwich strategy is based on the principle that when buying an unfamiliar product or service people tend to purchase a mid-priced version of it. Why? It all comes down to risk aversion - fear of making a bad purchase and flushing money down the toilet bowl. This toilet-bowl-infused aversion is the reason we shy away from the pricey models ("How much better could that stereo possibly sound?") and reject the cheap ones ("I bet this stereo would die after a month!").
Can I use a Product-Sandwich Strategy in my business?
Businesses that sell hard-to-value goods (e.g., perfume, body lotion, wine, caskets), or whose target customers tend to be product novices are generally best suited for a Product-Sandwich strategy.
- Think selling perfume to people who don't know the difference between eau de toilette and the water in their toilets.
- Or selling car oil to someone who doesn't happen to have a name embroidered on his shirt.
Make sure customers are made aware of the range of price points
One critical success factor for any product sandwich strategy is to ensure that your customers are aware of the different price points of your products, most notably your high-priced version. It is this awareness that leads your customers to view the mid-priced products as the mid-priced products, and hence the "safe, yet reasonable choice".
What do you think?
Have you ever employed a product-sandwich or similar such strategy? If so, how successful was it? What did you learn? What worked? What didn't work?
What ethical issues, if any, does this bring up for you? Do you view this as psychological manipulation or just good, plain marketing strategy?
Please share your experiences, comments, thoughts or questions.
Additional info sources on Product-Sandwich strategy & the psychology behind it
- Stumbling on Happiness
(Dan Gilbert's great follow-up book to his TED talk)
...and for those who really hate wine stores & happen to have iPhones