Tips on Structuring Your Service Menu – DSP 111

There’s a lot of nuance to how you structure your service menu that can have a significant impact on how your customers spend their money. The size of prices, how they’re ordered or arranged, what price you put first on the menu, etc. all make a difference. Given all these small details, it can seem daunting and make some business owners unsure of where to start or who’s advice to take.

Fortunately, Graham and Ashkahn have been at this for a long time and really dig marketing psychology, so they have lots of advice, tips and even some of the psychology behind why we do the things we do.

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Transcription of this episode… (in case you prefer reading)

Graham: Today’s question for you is, well I guess for us, but to you, is-

Ashkahn: From you.

Graham: “Any tips on how to structure your menu?”, you can’t tell it but I’m doing little air quotes right now. Menu-

Ashkahn: Yeah, I can tell you I’m verifying that. He is doing them.

Graham: Of float options. Any tips on how to structure your menu of float options?

Ashkahn: Yeah. I got some tips.

Graham: What are they?

Ashkahn: Well, I guess the first one is a warning. Because I think what can happen is, you have floats, right? And perhaps you offer different lengths of float. You know, maybe a 60 and a 90 minute.

Graham: Yeah maybe.

Ashkahn: And you maybe also have some memberships. And let’s say perhaps you have another service, like massage or something. But you also want to offer some sort of discount if people want a float and a massage. And also different memberships if people want floats and massage, versus just floats, or just massages.

And for those frequency and those lengths, and basically with just a few things. Like all you have is a float tank and a massage therapist. But all the different combinations of that, result in this menu of prices that’s huge, right?

You all of a sudden have a list of 30 things on your website. Of “well if you want two floats and one massage, it’s this price…”

Graham: It’s factorials, if you want know how to actually do the math on the combinations there.

Ashkahn: And yeah, it just gets out of hand, basically. And that’s not just out of hand in terms of your opinion. People have done research to show that there’s choice paralysis. If someone is presented with 30 different options, they freeze up and they don’t want to choose any of them.

So there is actually a benefit to you, to focus on keeping this as simple as you can, and reducing the number of choices. And on making this so that it’s not an overwhelming experience for someone, when they want to go look at your pricing.

Graham: And the magic number range is in the realm of 3 to 4 options. So, if you’re setting out your memberships for example, or if you’re setting out your basic kinds of floats, it doesn’t mean that you only need three options total. If you have massage and acupuncture, and floating of two different lengths, and you offer some other services, that all of a sudden you’ve broken that rule.

It’s just like, keep things within those categories, really simple. And honestly, if you can get down to one option, from the pure pricing theory, kind of standpoint or option theory, that’s actually kind of better in a lot of ways.

Ashkahn: And you know, I feel like graphic design can play a big role in this too. If you can do a really good job communicating information clearly, it frees you up to have a few more options because it’s easy enough to read what’s on the page, and see what’s going on. It doesn’t feel overwhelming.

So it’s almost like the number itself is one part of it, and how well you’ve displayed, and communicated, and how clear it is, is another factor.

Graham: Yeah, absolutely. And even along those same lines too, you can have a bigger menu that you don’t let people immediately in on. Kind of having a secret menu, or a hidden menu to your things.

So for example, we offer two, four and eight float a month memberships, and we also do a big yearly membership package as well. Which we can kind of get into why we launched that. It’s an interesting menu of items story.

But we also offer, and this isn’t on our website, or in our shop anywhere, but we also offer 12 floats a month, and 16 floats a month for memberships. It’s just that those are so seldom purchased, and the people who do purchase them are usually upgrading from eight floats a month. And are kind of like, “hey I want to get in more often. Do you have a cheaper membership?” Or something like that. And we’re like, “yeah we totally do.”

And that lets us keep our displayed menu really simple, while still having the benefit of, if someone does want to get a 12 float a month package, or a 16 float a month package, it’s totally available. And we can even mention it to them in person. It’s just not cluttering up our listed menu.

Ashkahn: Yeah. And this is a really interesting topic, this whole menu price thing. Because there’s actually a shocking amount of research that’s gone into this question. If you want to look into more hardcore neuromarketing, as they call it, a lot of it’s focused on this. This phenomena of how many options, and what the prices should be, and stuff like that. And what kind of behavior that leads to.

And there’s a lot of weird stuff and interesting tactics out there that companies use. There’s dummy pricing that people have. Where you’ll actually have, you know, you’ll go from two choices of price for things, to three. And you never really expect people to buy that third one, but it’s just there to make like the other two look really good. It’s an interesting tactic that works. You know, they test this stuff and it actually works, is the crazy part of all of it.

Graham: Yep. So an example might be that you have two floats for $100.00 a month or something, or they can do 4 floats for $180.00, or they can do 8 floats for $200.00. Right, and all of a sudden that 8 floats is so close to the 4 floats, and it’s such a disproportionate jump. Like if you go from 2 to 4, you’re going up $80.00. If you go from 4 to 8, you’re going up $20.00?

And so you wouldn’t actually expect anyone to buy the 4 float a month package. It’s just there as kind of this decoy, to make that 8 float a month look really good in comparison. And by extension, even that 2 floats down at the bottom is almost serving the main purpose of making that 8 floats at $200.00 look even better.

Ashkahn: And there’s some of this that comes in subtler ways too. And when we first started, we started just with a 4 float a month membership. It was the first thing we offered. We started with no memberships. And when we first introduced a 4 float a month membership, what was interesting was when we expanded to adding 2 floats a month, and 8 floats a month on top of that, I started to get a lot questions from people when they saw the 8 float a month membership, of like, “oh is it okay to float that much?”

That was a question that I got. And it was like, we didn’t have a ton of people necessarily signing up for our 8 float a month memberships, but it spawned a conversation in people, and it got people to realize that this is not something that you do once every 6 months to pamper yourself. This is something that people could do to become an actual part of their routine. Part of their lives. And make these incremental improvements.

And so when people would say that, “oh are you supposed to float that much?” Or “is it okay to float that much?” And you’d be like, “yeah!” And floating that much is great. The effects last for three, four days afterwards, so when you float twice a week, you’re just kind of living in Floatland.

People would be like, “okay cool. Yeah let me do the four float a month membership.” It was almost like getting the brain to consider it in a different way.

Graham: For sure. So I guess so far what we’ve covered is make sure that your options are simple. Know that people are comparing options, not just by themselves, but in comparison to the other options out there as well. So you can kind of have inner menu dynamics. And what was the last thing you just said?

Ashkahn: It’s the less concrete point, but they can even spur, not necessarily price relationship questions, but even just points of conversation about-

Graham: Right. Even realizing that floating can be done that often.

Ashkahn: Yeah changes in perspective, I guess.

Graham: So another really big one, is this idea of price anchoring. And as far as that whole, like we were talking about, the psychology of pricing, which definitely feel free to Google that, there are some great neuromarketing books out there as well. But the idea of price anchoring, of anchoring in general, is one of the most well studied and most salient things that you’ll run into out there.

It’s this idea that human beings are creatures of association. And because we exist on a timeline that just keeps pushing forward, anything that comes before something else happens, we still draw our conclusions about the second thing, from the first thing.

So when we’re doing pricing, what that means is, you want to show the high prices first, and anchor high, is kind of the saying in the pricing world. And the reason for that is because if you get them thinking about that high number first, then everything else is going to seem smaller by comparison.

And so when I said we had a good story about why we did a yearly membership to begin with, this is actually the main reason was, we had this 8 float a month membership that was several hundred dollars, and we wanted to make that 8 float a month membership look better.

So we were like, okay, what’s a big price that we could put that’s way higher than that few hundred dollars a month? And we decided to do a yearly membership, where people pay upfront for a float a week. So 52 floats. At our center we launched that with, it cost over $1500.00, it was about $1560.00, I think was the amount.

And now all of a sudden on our website, on our wall where we have the other membership pricing, we have this big $1560.00, which they see first. And it’s actually, the sign is even bigger than the other ones, to even take up physically more weight.

And then it goes down to our 8 float a month. And then it goes down to 4 floats a month. And by the time you get down to $65.00 for a 90 minute float, that looks incredibly reasonable compared to 1560 bucks.

As opposed to, if you start at $65.00, and work up from there? By the time you go to 8 floats and it’s several hundred dollars, that already looks unreasonable. And then you get up to 1560, and you’re like, “okay well that’s really high compared to that $65.00 I started with.”

So again, just the order that you list things in can really matter. And the standard advice is always list from highest price down to lowest price.

Ashkahn: And this sounds really silly in a certain way. You’re like, come on, people aren’t that gullible. This is like the infomercial trick, where they’re like, where they cross out the number and they drop it by $10.00, and all of a sudden you’re like, oh yeah.

But it’s been studied, almost more than anything. In this kind of psychology of marketing field, and it’s just consistently true. And it doesn’t even matter if the number is a price. People can get anchored by …

They did a study with giving people waiting tickets, with numbers on them. And ran it with one group getting lower numbers on their waiting tickets, like 8, 9 and 10. Another group getting much higher numbers, in the hundreds. And just that, just getting a higher number on your ticket that said where you were in line to get service led to people spending more money.

It’s crazy how much you are totally susceptible to these things, even if you think you’re not.

Graham: Even things like on an intake form. Having someone write down their phone number. Forcing whether they think the price is high or not. Versus not writing down their phone number. The people who write down the phone number, it’s such a long string of high numbers, that they’ll say a price seems lower than the people who didn’t write down the phone number.

Ashkahn: Yeah, it’s crazy. You have no control over your life, is basically what you learn from all this stuff.

Graham: So price anchoring though, is a really important one. If you’re going to list your prices and you have to list them in some order, do it from high to low.

Ashkahn: And you want to talk about round numbers here?

Graham: Yeah, that’s one that kind of goes back and forth a lot. Which is an interesting one. So this is things like, do you want to sell a float for $69.99 versus $70.00. Or something like that. Or $99.00 versus $100.00, or anything like that.

And it might just be a weak enough effect, which is why people’s opinion keeps hopping back and forth. Or it might just be so dependent upon other factors. But you’ll read all kind of … Like this is actually probably one of the most debated points.

But one thing that does seem to be the case is that round numbers, like to the zeroes and stuff like that. So, for instance $100.00, going from two digits to three digits, and having it be that round hundred number, just seems to occupy a more important high price place in our brain.

So even pricing something at $102.00, for example, as opposed to $100.00, they’ve done studies where that sells better. So pricing at 98 or 102 tends to be better than pricing directly at 100. Which is interesting.

And then there’s others that show absolutely no difference when they’ve done the studies between 99.99 and pricing at $100.00, and again a lot of that’s a little bit all over the place.

At Float On, we kind of have our own philosophical ideas behind that one too, which is, we like to be a transparent organization, so keeping our prices kind of looking really simple is very in line with our brand, in that sense.

Ashkahn: There’s also no sales tax here in Oregon, so for us there is actually and actual tangible simplicity to something costing a round number. Because people don’t end up with change or anything like that.

Graham: Yep. So that’s kind of our decision there. So we would happily price things at more like, $65 or $75.00. But often times, even if you look at our Float Tank Solutions site, or things like that, lots of our pricing doesn’t end exactly on 1,000, or exactly on 100, it’ll end at 70 or something like that. Or at 40.

And random fun fact, seven and four are the values that are the highest, compared to what we psychologically view them as. So in our brain, both four and seven are lower than what they are in comparison.

Ashkahn: And there’s a bunch of stuff like this out there. And it’s probably not worth completely obsessing about. Like, you don’t need to go and try to optimize for every single one of these psychological studies that you hear. But their good rules of thumb to follow and things to know about in the background. But at the end of the day, some of the stuff we said at the beginning of this, I think is going to outweigh a lot of these more subtler effects.

Like if you have a giant, giant menu of stuff and it doesn’t look good, and it’s not designed well graphically, and it’s not clear… I mean these things are going to be roadblocks before people even start having these more subtle psychological effects.

So definitely focus on the basics and that’s going to take you the furthest.

Graham: Yep. Keep it simple. Anchor high. I think those are the two really big ones.

Ashkahn: Yeah. And then profit, you know.

Graham: Dot, dot, dot, profit.

All right. Thanks so much for tuning in everyone, and we will see you tomorrow. If you have question of your own, go to floattanksolutions.com/podcast and send them our way.

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