Ten Starbucks Pricing Hacks
Membership associations can learn a lot about how to price their membership tiers from how Starbucks prices its products. The following 10 hacks are based on
pricing strategies used by Starbucks:
Focus on the center. We tend to gravitate towards whatever is in the middle because we think that’s the best bang for our buck. That’s why it’s important to have at least three membership tiers. Most people will land in the second, or center, tier.
The compromise effect. People typically want as much as they can get for the best value. If you have three tiers, most people will choose the middle tier because they’ll think they’re getting more than the bottom tier but not paying as much as the high tier.
Price anchoring. If you’re only offering one membership tier, you’re more than likely going to lose traffic on your page, because people will then go find competitors or outlets that have similar information to compare how much they would spend with them for a similar membership. But if you offer more than one tier, people will anchor and justify their purchase against your other options.
The attraction effect. People are more likely to be attracted to numbers with the same first digits ($420 and $490). When your third tier has a different front digit ($510), in a quick scan people will still feel like the first or the second tier is not as much of a jump (even though it’s $70 between $420 and $490 and only $20 between $490 and $510), because the 5 in the third tier seems like a jump up. For that reason, it’s best to have the same first digit for the second and third tiers. This way people then might justify bumping up to the third tier a bit more. You’ll have better conversion, even though most will still go to the second tier.
Keep it clean. When you’re listing prices, don’t include the decimal, comma, or even price symbol because keeping it clean makes it feel lower (495 rather than $495). Also, keep the amount to as few syllables as possible (400 rather than 416). When someone reads it out loud, the less it sounds like, the better.
End in 95 or 99. People tend to associate 99 with something being on sale, and therefore of less value. If we want a price to feel like it’s more intentional and not cheapened, it is better to end it in 95 rather than 99. The only time I like to end something in 99 is for an early bird or promotional rate.
ROI equals value minus price. Lay out the value of what people are getting versus what they’re paying, or they’ll do it themselves. If they can’t justify the ROI as the value minus what they’re paying, they’ll see it as a negative ROI and won’t continue their membership.
Mine your member data. Get as micro level as you can when looking at your member data and then let that drive your decision-making. For example, what are Gen A going to want in 10 to 15 years when they’re in the workforce and they’re going to be joining our associations? What are the things that you’ve been doing for Gen X that as they retire you won’t need to do so heavily?
Value boundaries and 10. Price boundaries. Visually show the value they are receiving from tier to tier and understand what will drive them between tiers. Include the pricing boundaries related to that too. For example, even though the value goes up 25 percent between tiers, the price only goes up by 10 percent. Just because something goes up exponentially in value doesn’t mean you raise the price by that much again. You still need a gap where the value is higher than the price.
