The safest way to raise your average price is to leave the known price alone and give people a reason to pay more.
A tier ladder, good, better and best, lets customers choose to pay more. Nobody’s reference price changes, and nobody is told the price went up. When it works, the average price rises while the price people compare stays where it was.
Itamar Simonson found in 1989 that people unsure what they want pick the option with the best reasons behind it, and that an option gains share when it becomes the compromise between two others Published. Add a Best tier above your hero and the hero becomes the sensible middle.
Don’t lean on the decoy effect, where a clearly worse option makes its neighbor look better. Shane Frederick, Leonard Lee and Ernest Baskin found in 2014 that it largely disappeared once people saw, tasted or pictured the products instead of reading numbers Published. Build each tier to be worth buying.
A fence lets different buyers pay different prices without anyone feeling cheated: a larger size, a set, a refill plan, premium materials, a service. It works when it’s real and buyers sort themselves by choosing it. The fence to avoid is “new customers only,” because it makes your existing customers the ones who pay more (chapter 9).
Say a brand sells its hero at $40 with $24 of variable cost. It introduces a smaller $36 version, keeps a $42 standard version with a small upgrade, and adds a $58 premium set ($22 and $30 of variable cost for the small and premium). If 30% buy the smallest, half the standard and a fifth the premium, the average price rises to $43.40 and average contribution per order from $16 to $18.80. That’s 8.5% more on price and 17.5% more on contribution, and the standard version rose only $2.
With the defaults, the ladder lifts average price 8.5% and contribution per order 17.5%, and the gain holds unless more than 71% of buyers choose the $36 version. The risk is the bottom rung. If Good is just a cheaper Better, buyers slide down. Make it a real step down: smaller, plainer.
John Gourville’s 1998 research on “pennies-a-day” framing found that stating a cost as a small daily amount, rather than a yearly total, led people to compare it with small everyday spending and made them more willing to pay Published. In a 2003 follow-up he found the effect reverses at large amounts: people preferred “$1 per day” to “$365 per year,” but “$4200 per year” to “$11.50 per day” Published.
So per-day framing suits consumables that cost a dollar or two a day. A supplement at $48 a month is “$1.60 a day.” A $3,000 mattress is not “$2.74 a day for three years.” For durables, cost per wear or per use works where it’s honest.
My rule around a price rise: show the full price next to the daily one. “Now $52 a month, about $1.73 a day” is fine. “Just 13 cents more a day,” alone, is hiding the change.
This is one chapter of The Price Rise, which is free and readable in full on a single page with no form in front of it.