Testing different levels of pricing

I was doing some research for the ANF conference tomorrow which we together with other industry leaders were invited, and I came up with this fascinating point that I think deserves some thought.
It is from some research done by an American Professor William Poundstone.

Here are some tests on people being offered for sale a range of beers.

Test 1

People were offered a regular option of $1.80 and a premium option of $2.50.

The result was 20% of the time they picked the regular option and 80% of the time they picked the premium so the average sale was $2.36.

Test 2

He offered a cheap option of $1.60 with the same regular option of $1.80 and the premium item of $2.50.

Now this is interesting in his sample no-one brought the cheap option, but 80% of the people brought the regular and only 20% brought the premium. The average sale now was $1.94.

Test 3

So what he did was took out the cheap option and replaced it with an expensive beer. So now people were being offered a regular beer of $1.80, a premium item of $2.50 and an expensive beer of $3.40.

The result was 5% brought the regular beer, 85% the premium and 10% the expensive. The average sale was now $2.55.

If you want to see how this works in practice have a listen to this youtube.

I suggest you use some of our reports to check the products lines and the prices you have on offer.