It is a truth universally acknowledged that a visit to Ikea must always include a meal of Swedish meatballs. While waiting in the meatball queue in one such visit recently, I snapped a photo of Ikea’s meatball pricing model, which bears a striking resemblance to the pricing model used by 37signals. Click on the images below for a larger image.
The 37signals pricing model for their most popular product, Basecamp, offers the “basic”, “plus” and “max” pricing plans equivalent to 10, 15 and 20 meatballs at Ikea. Upgrading from 10 to 15 meatballs only costs 13% extra, while the next upgrade costs 23%. At 37signals, add 100% to go from basic to plus and 200% to go from plus to max.
The mid-level pricing plan at 37signals has the tag-line “Most popular, best value” while Ikea goes one step further and highlights their 15 meatball option in red.
It’s a great tactic, which I’m sure is tried and tested in various industries and covered in countless Harvard Business Review case studies. This Ikea customer at least, always goes for 15 meatballs instead of 10.
For further reading, Paul Farnell at Salted who runs Litmus wrote an interesting article on pricing in Vitamin.
Update 09/10/08: 37signals discuss their meatball pricing strategy in a blog post: Ask 37signals: How did you come up with pricing for your products?
Well done.
This was an entertaining post to stumble on.
Geir,
Interesting blog. You’ve raised what the profession of selling has for many years called “Triplicate of Choice” pricing. All the great sales trainers mention it and encourage salespeople to practice it.
I wrote a blog to explain the tactic which (hopefully) gives a little insight:
Triplicate of Choice in Pricing
The tricky thing is replicating the offline model to be successful on the internet. And it really is quite tricky. Our company has created a large file sending service called 2Large2Email. We do something similar to the Basecamp pricing, but we take it one step further. Have a look, and notice the order of the pricing options and the associated colors.
The first time you look at it you might be a little confused but hundreds of studies in consumer cognitive behaviour and buying psychology show this works. And if studies aren’t enough proof, our results are!
If you understand how Triplicate of Choice pricing works, and you implement it properly, you could be on a winner.
Hmm. Seems I mucked up the URI. Here is the 2Large2Email Pricing Plan.