The magic of three

value pricing Oct 02, 2017

Why three is the magic number


Today I’d like to talk about an incredibly powerful concept known as the ‘magic of three’.  In brief, it means that any solution or service you offer should always, always give clients three pricing options.  And there’s a reason it’s something all the most successful businesses do.

You can find out more about how powerful the magic of three is in my video here.

Tall, grande or venti?

Who’s the most profitable coffee shop on the planet, for example?  That’s right.  Starbucks.  If you go into Starbucks most of their drinks offer three options – ‘tall’, ‘grande’ and ‘venti’ in the case of my personal favourite, latte!  Why?  It’s because behavioural economists have shown that, when faced with three choices, most people gravitate towards the middle.  Once you know this, it’s a huge opportunity.  Think about it.  If, in the past, you only offered one tax return service or form of company secretarial work, simply creating two further options will mean most people choose to pay you more.

Offer three choices …

In my own case, when I started my accounting firm back in the 1990s I used to do a lot of tax planning.  And part of this involved incorporations work – for tax purposes I would advise anyone trading as a sole trader or partnership to move to being a limited company.  During the first few years I charged a single fixed price of about £250.  Then in 1999 I came across the concept of the magic of three.  And, as a result, I made a couple of changes.  I created three different packages for my incorporation work:

·       Entry: Although this was the same level of work I'd always provided, I now documented exactly what I did on a sheet of paper.  (This part is important, because it's about building up the value.  Before I just used to reveal the price).  I also decided it was time to be brave and put the price up to £350.

·       Middle: I introduced some extra options and, as before, I documented exactly what I would offer clients, focusing on the benefits this would bring, and priced this one at £750.

·       Top: Finally I set up a high-end, all-inclusive package that offered to do even more for the client and priced it at £1250.

… and watch your income triple!

Whereas before I’d charged a single price of £250, I now offered three different packages at £350, £750 and £1250.  And, every time I used my new system with a client over the next two years, I'd go through the three choices.  What was fascinating was that over half of them chose to pay £750.  In other words, three times my old price.

Of the rest, over half chose the most expensive.  In fact, only a small proportion chose the cheapest.  Over those two years my average price was just over £775.  I’d increased the amount I earned from £250 to £775 just by changing two things: offering three choices and explaining the benefits of what I did.

I’d love to know whether it works for you, too, so do let me know the comments below.  Or, for some more tips about the best way to package your solutions, you can download my free training video programme, "A Systems Approach To Value Pricing".

Wishing you every success on your pricing journey.

Mark Wickersham
Chartered Accountant, public speaker and #1 best-selling author of
Effective Pricing for Accountants

"A Practical Approach To Value Pricing"

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