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Capitalizing on G-B-B G-B-B’s benefits come from three approaches:

offensive plays aimed at generating new growth and revenue, defensive plays meant to counter or forestall moves by competitors, and behavioral plays that draw on principles of consumer psychology, whatever the competitive landscape. Going on the offensive. Offensive plays can help brands grow revenue in at least four ways. First, companies can dramatically lift margins by creating a high-end Best version that persuades existing customers to spend more or attracts a new cohort of high spenders. In my work with companies, managers consistently underestimate customers’ willingness to spend and the number of customers who might upgrade to Best, even at prices that were previously unthinkable. Across a range of industries, it’s not unusual to observe up to 40% of sales landing on the Best option. For example, visitors at Six Flags amusement parks can buy one of three Flash Passes (Regular, Gold, and Platinum add-on options to the standard admission ticket, with prices varying by day and location) to bypass lines and thus enjoy more rides. The Gold Pass, which costs as much as $80 a day on popular weekends, reduces waits by up to 50%; the Platinum Pass, which can reach $135, reduces them by up to 90%. “It’s amazing, actually, how many people pay for this,” then-CFO John Duffey told analysts shortly after the new passes were rolled out, in 2011. Many Flash Pass purchasers are existing customers who decide to upgrade, but some are new customers who had previously been put off by the notoriously long lines for rides.

Brainstorming About Tiers and Features

When considering a G-B-B pricing structure, the first step is to decide how many product versions to offer. As the name implies, the most common approach is three. In general, companies with a single existing product will designate it (or something close to it) as Better, adding features to create Best and subtracting them for Good. But if taking away features to create a Good offering isn’t feasible, companies can forgo that option and simply offer Better and Best. Companies with complex products or a long buying cycle may be able to justify more versions. But too much choice is risky. In a well-documented study by Sheena Iyengar and Mark Lepper, researchers offered samples of jam to shoppers in an upscale grocery store. When presented with six flavors, 30% of tasters made a purchase. When 24 options were on the table, only 3% opted to buy. Researchers believe that when consumers have too many options, they become confused or paralyzed with indecision—a phenomenon the psychologist Barry Schwartz explored in The Paradox of Choice. If a company is set on many offerings, it can be useful to group them in a way that turns consumers’ decision making into a two-step process. New York’s Metropolitan Museum of Art offers seven memberships. To minimize confusion, it divides them into two categories: Members Count plans ($80 to $600) for people joining primarily because they want to visit the museum, and Patron Circle memberships ($1,500 to $25,000) for those whose primary goal is philanthropic. Grouping memberships in such a way guides people toward a general category; once there, they can examine the G-B-B options in each. After a company has gotten a sense of how many tiers to offer, managers can brainstorm about the features to include in each. Sometimes the decisions are obvious, but many of the best G-B-B plans draw on unexpected features, as Six Flags did when manipulating wait times to create a consumer benefit for its Flash Passes

 

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  • Posted on : June 17th, 2019

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