Tuesday, 10 January 2012

When Gold/Silver/Bronze Packages Become A Bad Idea

I have long been a fan of creating different service qualities for different client groups; different service packages at different price points for differing client needs and pockets. There is, however, a big BUT...

Gold/Silver/Bronze can in fact be expanded into Platinum/Gold/Silver/Bronze/Paper product classes where ‘platinum’ is uber-expensive and ‘paper’ is free (See Expensive is the New Free)

The incremental cost of selling the premium price product tends to be negligible so it makes sense to spend more time selling the better (and more profitable) offering. Despite this, there is an opposite pull – a force to dissipate the benefits of premium pricing. One which will damage your business.

So, here’s the problem, the paradox. In the interests of growing our businesses we look to maximise our opportunities to grow our client base. As a result we might abuse the various package offers and alienate our existing loyal customers by doing the following:
  • Take away parts of the platinum offering to increase profits quickly
  • Downsell clients as a quick win (losing out on the more profitable opportunity)
  • Upsell clients when they don’t really want it creating resentment
  • Discount the higher level offering to win the sale
  • Forget about the platinum clients as we chase new sales.
Of course it is correct to sell (or rather to upsell) to people who wish to pay a premium price. Do not forget, however, that they are paying for and expect to receive the premium-priced service.

Creating different product packages (gold/silver/bronze) works but please be careful not to kill the goose that lays the golden egg.

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