How You Present Pricing Makes a Big Difference
Frequently, I get into conversations with museum decision-makers about potentially increasing the price of their admission. This is a common discussion as we are all on tight budgets, and every dollar matters to our ultimate sustainability. First, understand that people’s perceptions of pricing are variable based on a number of perceptual considerations. Second, the way we present our pricing is as important, sometimes more important, than the actual numbers.
In the field of behavioral finance, which studies how emotions and other extraneous factors influence economic choices, there is a concept called the “relativity trap.” The relativity trap arises because the human brain works comparatively when making comparisons in financial decisions. You run into this phenomenon every single day. When you look at a menu, there is always at least one item on the menu significantly more expensive than the others because it has been proven that the average menu item chosen is more costly when higher-priced items are on the menu. We make buying decisions based on the relativity of pricing, not any universal understanding of pricing related to value.
As it related to museum admissions pricing, museums that are the most successful in increasing the average admission transaction amount present three tiers of pricing. For example, the top price may be the cost of an annual membership, the second price may be a guided tour or other ‘add on’ option, and the bottom price is the general admission price. When we present our pricing based on three tiers, it will increase the average admission transaction without having to increase our general admission price.
Article by Frank Bennett