The Psychology Of The Middle Offer

Every second, people are making billions of choices online. They’re also spending billions of dollars as they make these choices. And, interesting enough, they are choosing the middle offer.

I’m in the business of figuring out why people make these choices. There has to be a reason — beyond caffeine-fueled, sugar-laden indigestion — why people choose one over the other.

Thankfully, it’s not a mystery. And, thankfully, due to some good-old fashioned research and hard work, I’ve figured out a lot of the answers. And, thankfully — this is the good part — I’m going to tell you why.

Three Choices

It’s common in e-commerce to present customers with three choices. Whether this includes product placement in an online catalog or three choices for a SaaS plan, the three-tier model is the most common.

Most people choose the middle choice.

My goal in this article is to show you why that is.  Why in the world do people choose the third option? And, more important, what should you do about it?

Customers Will Choose Your Middle Offer

In any e-commerce scenario, when you present three price choices, customers will most often choose the middle offer in terms of pricing.

The focus of this article is upon plan models or subscription services — SaaS, photo downloads, accounting SaaS, website CMS, etc.

Outside of the e-commerce world, it works great for places like, say, a coffee shop or ice cream parlor. You sell a small, medium and large, and what will people choose most of the time? A medium.

The middle option, of course is the version that smart marketers have tailored to have the highest profit margin.

You can use this technique to work with e-commerce sales of physical products. For example, let’s say you’re selling cameras. You can provide customers with three Canon camera choices — good, better, and best. Or, if you’re selling men’s wallets, give three options — faux leather, real leather, and exotic calfskin.

It may take some creativity for an e-commerce application, but you can easily spin it the right way to get the psychological uptick of this three-choice genius.

The Surprising Psychology Behind the Middle Choice

Let’s dig into the data and figure out what psychology says about the middle-choice mystery.

Choosing the Middle Option

Dr. Paul Rodway is an experimental psychologist and senior lecturer at the University of Chester. His research interests are the “subconscious factors that influence preference and choices.” I’m interested in that, too.

Chester and his colleagues conducted a study published in Applied “Cognitive Psychology, to determine which choice — and why — study participants would make. Overwhelmingly, the subjects selected the middle option.

appliedcognitive

It didn’t matter if the arrangement was horizontal or vertical, if the items were identical, or if the item was socks (it was socks), the outcome was overwhelming:  Participants “preferred pictures in the centre rather than at either end.”

It’s called the “centre stage effect” (British spelling included for a bit of scholarly edge). But obviously, we’re interested in neither stages nor socks. We’re interested in pricing models for e-commerce.

It works for pricing, too.

The center-stage effect has implications just about everywhere you go. Architecture (three doors; most people go in the middle), retail (center shelf product placement), and civil engineering (three lanes; most popular middle lane) all have to take this into account. Even AdWords wizards should take note.

And, yes, as the research indicates, this works for pricing models as well.

Researchers at the University of California, Berkeley, produced a scholarly treatment that advised best practices for pricing points in a research monograph called “Versioning.”

 versioning

Based on their study — a combination of psychology and complicated algebraic formulations, that middle pricing option is the magic number. Somehow, this complicated little diagram proves it to be so:

quantity

Image from http://people.ischool.berkeley.edu/~hal/Papers/version.pdf

in the Journal of Consumer Psychology, the research drove this theory to its marketplace conclusion once again in a study titled “Position-based beliefs: The Center-Stage Effect.” The bottom line was this:  “Consumers believe that options placed in the center of a simultaneously presented array are the most popular.”

The Surprising Thing about It

Here’s the kicker, though. The studies affirm that the products to either side don’t matter. The real deciding factor is how popular the middle offer is perceived to be. In other words, this is nothing more than the bandwagon technique — “Lots of people chose this one? Oh, okay. Well, I will too!”

In the customer’s mind, she thinks that all her friends and smart competitors are making the middle choice, so she’s going to do the same thing.

The Consumer Psychology report clearly states, “Results are driven by inferences of product popularity rather than higher levels of attention to products in a given position.” Layout on the page is important, but not as important as clearly making the point that this choice is the one that everyone’s choosing.

The CP abstract goes on to make the point, “The preference for middle options is accentuated when people explicitly take into account other people’s preferences, increasing the need to choose a popular option.”

When applied, then, it makes sense to clearly identify a given choice as the most popular one. This is exactly what many marketers have done. For example, Xero, an accounting software, makes it easy for us. They tell us exactly which choice is the most popular:

mostpopular

Squarespace, a CMS, does the same thing. Combined with color psychology, they indicate which is the best option. That two-word phrase, “most popular” does more to make us spend an extra eight bucks a month than boring bullets of benefits does.

shipstation

It’s pure, raw, unadulterated psychological power. It’s the “most popular.” Therefore, says our undeniable psychological voice, it’s good.

That’s the surprising thing:  This psychological middle option is predicated on the human tendency to go with the flow and follow the herd. Basically, it’s group psychology.

If Robert Frost would have been honest, he would have written:

Three roads diverged in a yellow wood.
And I chose the one that everyone else was going down.

The Two Adjustable Factors, and the Power of the Middle Choice

When three choices are presented, they will differ in just two ways: 1) price and 2) perceived value. You control both of these factors, and essentially steer the customer to the exact one.

I’ll explain how this is the case by, 1) describing the price, then 2) the perceived value and 3) the steering mechanism that controls which one the customer will choose.

Price

You decide the sticker price of your deliverable. You create something of low value with your profit margin, something of good value with your profit margin, plus something of higher value, with your profit margin. More on profit margins below.

Perceived Value

The value of a product or service offering is how a customer thinks about what they are getting. This doesn’t have as much to do with “gigabytes per month” or “55 downloads per day” as much as it does the overall effect of all those things combined.

In other words, you create a value sense, which includes deliverable, product information, benefits, features, guarantees, etc. Then, you package in some extra psychological cues, such as “most popular,” “best value,” or other strategic verbiage. Each of these cues signals to the buyer the overall value of the product   they are choosing.

Here’s how several  brands have done this:

Here’s Shutterstock:

shutterstock

 

They use a nice callout for the “Subscriptions” service, plus a differentiated red “Buy Now” button. The two other options, “Images on Demand,” and “Free Browse Account” have what look like grayed-out buttons, which makes them look almost unclickable. Strategically, they use the “most popular plan” statement to enhance the psychological allure.

Rather bland, the “Subscriptions” service is subdivided into three tiers. They use radio buttons and “save $” verbiage.

I will point out, by way of critique, that in order to garner higher conversions, Shutterstock could have enhanced the middle option with some design panache, plus pre-selected the radio option. Besides, the tier-within-tier account setup is kind of confusing.

Anyway, it is what it is. Either way, the customer senses that the greatest value comes from the middle option. That’s easy to tell.

Sproutsocial’s three-option plan looks like this:

sproutsocial

The “most popular” verbiage is cloaked in a sophisticated bit of copy magic. Compare the following:

1. Standard plan:  “Small teams”

2. Deluxe plan:  “Everything you need” (emphasis mine)

3. Premium:  “Sophisticated objectives”

Few people want to be a “small team,” and few people are going to pay more if they don’t even know what “advanced tools” or “sophisticated objectives are.” Naturally, people are going to feel like they fall into the everyman, popular, and friendly choice:  “Everything you need.”

With color differentiation, it becomes a natural choice. Value perceived. Sale made.

Here’s what Hootsuite looks like:

hootsuite

Again, color differentiation really helps the middle option stand out. Plus, if you choose this option you get a “30 day free trial.” Hard to resist.

The Power of the Middle Choice

So, those are the two adjustable factors. But what’s the real clincher? It’s all about positioning.

As long as there is a middle way — a grande latte, a medium scoop, a deluxe plan, a silver membership — people will choose this one. Sure, you’ll need to fuss with the perceived value to get it just right. You’ll need to make sure you’ve tweaked price perfectly. But the real, big, most important thing is this:  make sure you have a middle option.

Three is a very powerful number. Three choices, three points in a speech, three reasons why, three guys walk into a bar, three wishes, three lives, three strikes, three pointer, three heavens, three, three, three — it’s way more lucky than seven.

People will choose the middle option. Psychology says it’s so. Experience confirms it. The stars have aligned.

It’s just that simple.

A Word about Profits

When you’re choosing your profit margin, here’s how you want it to look:

  1. Low-tier product:  Low profit margin
  2. Middle product:  High profit margin.
  3. Premium product:  High profit margin.

 

Since most customers will choose the middle option, you want this to be the sweet spot where you create the greatest profit.

Two Smart Things You Should Do Based on Three-Option Psychology

Now, it’s time to angle in on some cash-in takeaways. That information I just served up is fascinating, but it’s worth about as much as a golden turd unless you actually do something about it. Here’s what to do about it.

Make your middle offer the absolute best it can be.

If you forget every other sentence in this article, I don’t really care, as long as you remember this thought:  Make your middle offer the best you possibly can. This is your gold mine. It’s your sweet spot. This is the place where conversions happen, where unicorns frolic, and where rainbows end. Soak it in the brew of your genius, and let it steep all the amazing and creative flavor that you can muster.

Okay, you get the idea.

Let me tell you how to make this middle option a brilliantly powerful and sizzingly scintillating place of joy:

  • Tell them it’s the best. Clearly spell it out:  “Best offer,” “Greatest value,” “Most valuable.”
  • Tell them they’re getting a discount:  “15% off regular price!,” “Half off yearly subscription.”
  • Throw in some free stuff. “Free hosting for the first two months!,” “Free domain registration,” “Complimentary call support.”
  • Tell them it’s popular. This serves simply to reinforce the psychological backing of the middle-offer phenomenon:  “Most popular!,” “Chosen by most customers,” “Our most popular offer.”

The middle offer should be good for you (solid revenue) and good for your customer (solid deliverable).

Only Three Options! No More, No Less!

Don’t give your customer more options than three. You’ll kill sales if you do so. I don’t care how awesome your fourth or fifth offer is. Don’t do it.

When you load up too many options, you enter dangerous psychological territory. It’s called  option overload, also known as “the paradox of choice” in the terminology of Barry Schwartz, the psychology professor who wrote the book on the subject. Once you go beyond three, sales will begin to drop off.

Don’t try to upsell from the middle offer during the initial sales process. It’s just not necessary. It’s an unnatural psychological ploy that will come across as offputting.

Don’t feel any need to try to compel your customers to “upgrade now for only 15% more,” or send odious followup emails about getting platinum service for a discount. You’ve already sold them your best offer. This is, psychologically speaking, the exact purchase that they should have made.

So, let it be. Be happy with it. They’re happy. Just three.

Conclusion

In the e-commerce world, three is your magic number. That third choice is where the conversions will come gushing in.

Don’t just take my word for it, though. Testing it yourself is one of the best ways to provide proof. In my experience, testing indicates consistent higher results on the middle option.

Anymore than three, and you’re shooting your conversion rate. Any less than three, and you’re limited. Give your customers three options, make that third one the best it can be, and you’re ready for the big time of e-commerce success.