value-gapI love research. It’s one of my favorite past times on the Internet and I do it just about every day in one form or another.

Researching competitors and other industries out there is something you should be doing on a regular basis to see exactly how they work and if you can get any ideas for your business.

In fact, many of the tactics you see that are being used in whatever market is typically borrowed from another market. We borrow all the time. At one point a few years back I was called the most honest thief in the industry because I would steal ideas from all kinds of industries, but I always shared where I found it.

Recently, I happened to be on a website, and I was looking at the product. It sounded good so I wanted to see what their price points were. Here is what I noticed, and it was a very interesting strategy.

The first thing was that you could join this particular site for $99 a month. I thought that was fairly reasonable, but beneath that it said “or buy one full year for only $497.” I stopped for a moment and read it again.

Let me ask you a question. Which one do you think they were really trying to promote? If you said the $497, then I would say you were right.

Now, I don’t know this company, but let’s break it down and check it out. At $99 a month, that’s approximately $1,200 a year or, you could pay a one time cost for the year of just $497, which saves you about $700. So, you would be a fool to take the $99 a month option.

They are using a tactic I call the value gap, which means there’s a distance between what you want people to take or to actually purchase versus a decoy.

The decoy is set out just to show value and without the decoy, the value would just be $497. Here’s why — $497 by itself may or may not be attractive, but when you compare it to paying $1,200 a year, $497 instantly becomes very attractive.

You have to be careful as far as the structure on this. If you didn’t have $497, then the $99 would sound attractive, because it’s affordable and if you don’t have the extra $400 on top of that, it may be your better option, but again, over the course of a year, you’re paying $1,200.

The point about this particular strategy is that it only works if you have the decoy. So, there are two distinct strategies.

Think about how you could do this for your business and how you could implement this strategy as well into a membership site.

Think of how you could implement this into one of your products. You could even twist it to make it work for a service business. It’s quite a brilliant strategy and I have to applaud them for implementing it. It’s something I will have to try out on something in the future. If it works, I’ll give you an update on it in a future article.

Just keep it in mind that there are different ways to present your information to people and to make it so they actually want to buy it. You see, I believe that any information can be made more attractive from a prospect’s point of view.

This new tactic was found simply by researching what is out there and what is being used and working in other industries. Drop me a line with your results if you try this tactic out.

4 Comments

  1. NEWTRAFFIC on September 14, 2011 at 4:52 am

    I would like to add that this tactic, you call value gap, is being carried out very often these days. Morover it’s being carried out to get you on board but hidden costs, like making use of a specific functionality, are not uncommon.



  2. Chris on September 17, 2011 at 11:34 pm

    Kinda makes me think of Dan Ariely’s ‘Predictably Irrational’. The way a question is structured e.g. $1200 vs $497 has a lot to do with how people will react to it. You can almost guide them to where you would prefer that they go. In this case $497 is preferable even though it costs more in the short term. Nice.
    Chris



  3. Charles Kirkland on October 29, 2011 at 11:32 pm

    What I have done that works very well is after the first month anybody who took the $97 offer I will send them the link for the $497offer and then offer to credit them with the $97 they just paid to the $497 offer.

    Charles Kirkland



  4. Shaun on November 28, 2011 at 1:58 pm

    The Value Gap is now a tool in my arsenal. Thank you Armand!