Price Framing
How you frame the price of a product can deeply affect its perceived value.
The value of a product is influenced more by perception than by price.
In 2014 KFC Australia asked ad agency Ogivly Australia to help them increase the "perceived" value of their $1.00 french fries.
What this meant was that Ogilvy couldn't change how KFC french fries tasted. Nor could they change the price.
So all team Ogilvy could do was change how Australians thought of KFC's $1.00 french fries.
Naturally, being an ad agency that believes "the greatest gains to be made in business and society today are psychological, not technological" Ogivly Australia digged deeper.
They discovered 18 psychology principles that affect how people make choices.
18 cognitive biases that particularly affect the perception of value of fast-moving consumer goods like fast food.
So first team Ogilvy came up with 90 different ways of communicating the value of KFC $1.00 french fries.
Then team Ogilvy cut everything down to 5 messages.
5 different ways of saying one-dollar french fries. And each one exploring one different cognitive bias.
1. “$1.00 french fries won't be around forever.”
Psychologically, humans tend to prefer to avoid a loss more than they prefer to win something of the same value.
So team Ogilvy's copy included a time constraint. Because saying "Won't be around forever" creates a sense of urgency and triggers loss aversion.
2. "You wanted free french fries, but we’ll meet you halfway with our french fries for $1."
It turns out people are wired to return favors we receive from others. Psychologists call this reciprocity.
3.“$1.00 french fries - pickup only.”
KFC Australia doesn't do delivery. So by admitting a negative (this deal is available for pickup only) it is instantly accepted as truth. And reinforces the value of $1.00 french fries. Psychologists call this the Pratfall effect.
4. "A deal so good you can only buy four."
Instead of using the classic quantity disclaimer and placing it in tiny words at the bottom of ads, team Ogilvy made it the star of the headline.
By mentioning an anchor quantity ("you can only buy 4 x $1.00 french fries"), this influenced the perceived quantity that every KFC customer should buy.
5. “Everyone's enjoying our french fries for $1, why not you?”
KFC here used the bandwagon effect to appeal to people's desire to be part of the popular choice.
Then team Ogilvy tested for a week each of these five messages as sponsored social media posts.
"A deal so good you can only buy four" outperformed all the others. So Ogilvy came up with an ad campaign that used this headline.
Now hold your breath for what happened next.
Compared to 2013 KFC's french fry sales increased 56%. And increased 84% in 4 french fry orders.
All because Ogilvy Australia understood that how you frame the price of a product can deeply affect its perceived value.
Takeaways for your business:
1. As Rory Sutherland says, “Price is not perceived rationally, it’s perception driven.”
As Rory says, that's why in most Western countries paying $100 in a French restaurant is perfectly acceptable.
But if you run a fancy Chinese restaurant and try charging $100 for a 10-course dinner, guess what happens? Most customers will furiosly question, "Why is this so expensive?!"
The perception is that Chinese food is supposed to be cheap. Even though Chinese food is just as sophisticated, complex and delicious as French food.
2. How you frame your product’s price & features affects the way consumers perceive its value.
Research (Lee & Zhao, 2014) shows that consumers tend to believe that more features means greater value. At least over the long-term. But if you frame your product as a no-hassle convenient option for the short-run, they'll choose the simpler product.
Here's an example. If you're selling a digital camera, most consumers will pick the simpler, easy-to-use version. As long as you communicate your camera's ease of use (instead of its features).
