Have you ever wondered if you left money on the table after selling a farm product or service? For example, is your CSA maximizing your profits while meeting all your customer’s pain points or needs & desires?
Today we will go over exactly how to set up your pricing so that you can make nice profit margins while meeting the goals of your customers! Plus, I will be giving out an insider marketing tip towards the end! So Let’s jump in!
So do you ever wonder why gas stations have regular, plus, and super fuel options? Or why do concert venues sell general admission, assigned, & VIP seating options? Or why do TV cable providers have basic, extended, & premium packages?
It’s because they are all using a Pricing strategy that maximizes their profits while satisfying the needs & desires of their customers!
Author William Poundstone in his book titled “Priceless: The myth of Fair Value (and How to Take Advantage of It)” talked about a study by an MIT professor that went on to have a huge impact on how businesses structure their pricing. We used to think consumers would primarily take the lower pricing option if given two similar but slightly different products or services but because of this study, we now know that is now true.
The study worked with a local bar that was serving 2 beer options, it found that only 15% went with the cheapest option and 85% went with the more expensive option. The researchers then added a 3rd premium option and found that this swayed the curve, now 10% chose the cheapest option, 80% chose the higher-priced middle option, & the last 10% chose the premium option, meaning the bar had higher overall profits by just going from 2 to now three options.
This law of 3 or of tiered pricing is simply called GBB or the Good, Better, Best principle.
You see by providing your customer with a “Good, Better, Best” pricing option this changes their psychology of buying from “Should I buy or not buy?” to “Which option would I be most interested in buying?”
You’re changing the narrative for your customer from making them feel like they are under an ultimatum “buy or don’t buy” to instead giving them choices and a sense of empowerment.
We as humans innately want the “best” for ourselves and our families but we also want to feel we are getting a deal or something of great value, so our inclination is to naturally choose the middle option when provided a “Good, Better, Best” product or service.
And this was confirmed by the study I just mentioned as 80% of the bar patrons chose the middle or “Better” option from the “Good, Better, Best” beer list.
So, how do you practically apply the “Good, Better, Best” pricing strategy to your farm?
As always it comes down to CONTEXT. Meaning it depends on your specific farm business and its products & or services. For example, let’s say you have a small vegetable farm.
A simple way to do it is, you could provide a CSA box that has “Small, Medium, & Large” farm share box sizes.
If you wanted to get a little more technical you could have the customer first select their appropriate family size then provide them the “Good, Better, Best” options within that family size.
You see by doing this you are meeting your customer’s NEED for example “I have a family of 4 that needs food every week” & then empowering them to choose an additional WANT your customer may have.
For example, after they choose their family size you can provide them a “Good, Better, Best” option of a “Veggie Box, Veggie + Fruits Box, or a Veggie + Fruit + Flowers Box”
There are a million ways to do this so have fun with it!
For example, another pricing structure could be “Pick your own, we pick & have pick up locations for you, or we deliver your box straight to your door”.
Also, don’t be afraid to partner with other similar but different local businesses.
For example, if you team up with a local free-range egg farm & a mushroom farm your “Good, Better, Best” pricing structure could be “Veggies, Veggies + Eggs, or Veggies + Eggs + Mushrooms”. You just need to make sure your margins are healthy and your partners are reliable.
Here are a few other partnership ideas: Grass-fed beef or pork, fresh bread from the bakery, weekly dried teas, fermented foods, dairy, pastured poultry, and this list goes on.
I personally always thought it would be really cool if a farm offered a “VIP weekly local tour CSA box” as their premium product with a different surprise local item in their farm share CSA box each week. For example, one week it could be a local hot sauce, the next local salsa, and then maybe local honey, you get the idea.
Before we get to my insider marketing tip, I am going to take a second and remind you that if you enjoy this blog and want to see more sweet articles like this then do me a huge favor by adding your email to our newsletter!
So my insider marketing tip for you today is to display your “premium” product or service FIRST when presenting them your “Good, Better, Best” pricing options! This is a well-known principle in the world of marketing. By setting the bar or what we call in the “Anchor” price then gives your customer a set starting point when estimating any product or services value. By doing this we are setting up our customer’s buying experience to be happy and empowering.
For example, if you look at concert tickets and you first see first that the VIP tickets go for $250, then you see that the assigned seating & general admission tickets go for $75 & $50 each then as the consumer you are led to feel as if the $75 & $50 tickets are a bargain!
Lastly, remember to test, test, & re-test! This can be a big decision so talk to your customers to find out what their pain points or needs & desires are. Watch to see if your customers are often buying other similar but different products when at the farmers market and consider partnering with those businesses. Or consider doing some research into why some people are never becoming your customers in the first place and attempt to fix that barrier to entry with your New “Good, Better, Best” strategy.
Again, there are a million ways to do this so have fun with it. Do what you think is best for your business and its context. By just simply applying these few principles you are already on your way to better profits and a more secure future for your farm business.
Be sure to subscribe to our newsletter to learn more! Thanks & Happy Farming!
- John Reinwald, owner of Farmstand Revival, an all-in-one digital marketing agency that specializes in regenerative agriculture
