[Pricing Nugget #051] Making a Difference With Multipacks

Let us quickly recap what the "differential price framing” is about.

Assume you are selling a monitor of 24 inches for $199 and you are selling a monitor of 27 inches for $259. How should you present the price for the larger option? For the 27-inch monitor, you could present it as $259, or you present it as $60 more. By presenting only the difference between the two options, you increase the purchase likelihood of the larger option.

This is the "differential price framing effect."

Today, I am glad to share some of my own research (accepted for publication, available online). To study more closely the "differential price framing effect," our research team investigated three questions. 

1. Does it exist in the real world with actual transactions, not only laboratory experiments?
2. Does it also work with three options?
3. And does it also work with multipacks, and not only with items that have higher quality but are a multiple of the smaller ones?

We collaborated with a large German basic clothing retailer. And this basic clothing retailer offered 43 different products across six categories, and we included all of them in our experiments.

The retailer offered multipacks of different sizes, for example, three different sizes of multipacks, like 3 versus 6 versus 9 t-shirts.

We ran the experiment for a couple of weeks, and we gathered 138,000 website visitors that we randomly assigned to the inclusive price framing condition and to the differential price framing condition.

Then we measured the choice shares of buying the smaller pack size, the medium pack size, and the larger pack size. 

And this is how it looked on the website. We had the inclusive price framing, in this case, six items for €39.99, 12 items for €72.99, and 18 items for €100.99 in the inclusive price framing condition. And in the differential price framing condition, the smaller pack size was presented the same, but the twelve items were represented as €33 more, and the 18 items are presented as €61 more. Three different pack sizes with two different framings.

Then we also included the savings and the average price per unit to ensure that this effect still holds, even if you add more price information to the condition.

In this case, we showed the average price is €6.67 per unit. And we called out how many percentage points you save when buying larger pack sizes. In this case, for the mid-size multipack, you save 9%, and when buying the larger pack size of 18 units, you save 16%. We ensured these presentations remained the same across the inclusive and the differential price framing.

What did we find out?

The conversion rate is not affected by whether you present the price as an inclusive price frame or as a differential price frame.

Customers are more likely to add medium and larger pack sizes to their carts. Instead of 18.3% for the inclusive price framing, when presented to prices as a differential price framing, 28.9% would add medium and larger pack sizes to their cart. This uplift represents 58%.

But turning to complete purchases, the uplift is still there, and it is still statistically significant. However, the uplift drops from +58% to +17%. It is not as strong as we suspected at the beginning.

And when looking at the average order value, you find an uplift of about +3% when presenting the prices as a differential price frame.

Asking for their offer evaluation, customers evaluated the first offer as significantly higher than the second one. This shows that the liking of numbers also impacts the liking of the price.

The crazy point here is that unlimited toppings are superior to six toppings. But making this multiplication more salient, customers like the first advertisement more.

What did we learn today?

We learned today that the "differential price framing effect" exists in the real world. It works for three options, and it also works for multipacks, not only for options that differ by the level of quality but also quantity.

However, the effect is not as strong as we expected it to be, but it is still there. We should consider it as a low-hanging fruit. It is about presenting the same price, just in a different way.