The art of pricing

“Bread without butter: 60. Bread without margarine: 40.”

This is either magnificent pricing psychology or somebody has been inhaling the till roll.

The joke works because absence has acquired two prices. Plain bread is no longer plain bread; it is a disappointed version of whichever topping you nearly bought. The menu has turned subtraction into a product feature.

Plenty of modern pricing does the same thing with better typography. Basic is unusable but cheap enough for the comparison table. Premium contains seven features, five of which exist to make Plus look prudent. “Save £18” appears beside an annual commitment that has not saved anybody £18 unless monthly billing was a serious life plan.

Companies call this choice architecture. Customers may call it being made to sit an exam before buying broadband.

Complexity is sometimes honest. Different customers create different costs; pretending otherwise merely hides the subsidy. But when the explanation requires a guided tour of the company’s org chart, the customer is being charged for internal confusion. And when profit depends on forgetting to cancel, missing a condition or choosing the wrong allowance, comprehension has become the house opponent.

I once saw a software page with three tiers labelled Essential, Professional and Complete. Essential lacked an essential feature. Professional was for everybody. Complete was professional with a tote bag’s worth of digital garnish. The pricing team had invented language in which words reported to finance.

The Colombian café at least gives us a decent punchline. Ask for bread without both butter and margarine and see whether they pay you twenty pesos.

Behavioural principles

Behavioural ideas at play in this post

Short, plain-English explanations of the principles behind this post, with links to related books and examples in the archive.