The magic of three-tier pricing
By Mike Jackson
Posted on Friday, December 28th, 2018
Mike’s approach has helped sign people boost profits for over three decades
Thirty-two years ago, Mike Jackson wrote an article, “Price your work on three levels for easier sales”, for SignCraft. Those two pages outlined Mike’s easy sales approach of offering customers three options on most quotes: economy, basic, deluxe.
Immediately we started hearing from readers who were upselling their customers to betterlooking, more effective signs—and making more money in the process. It’s been mentioned in the magazine many times over the years by others who have put Mike’s approach to work successfully, and readers continue to tell us how well it works.
Some have said that thanks to Mike’s article, virtually no quote leaves their shop without an offer of two upgraded versions— from the basic yard sign on a stake to a 4-by-12-ft. monument sign. Others have told us that they found that over half their customers opt for an upgraded version since they use this approach. It consistently increases their sales volume without their needing to find more customers.
It may also be the easiest way to uncover the customer’s budget. Asking a customer what their budget is seldom results in an accurate number. Many customers seem to freeze, either because they don’t know how much they will need to spend on their sign or because they’re afraid to show their hand so early in the process. They may think that they won’t get their money’s worth once the sign maker knows what they’re willing to spend.
But Mike’s approach usually smokes out the budget without needing to ask the customer directly. By giving them three options—one of which is considerably higher than the other two—the customer usually reveals what they are willing to spend on the sign. And seeing examples of each of the three levels of signage helps them see the obvious benefit in spending more. You can quickly tell if their budget number is firm or flexible.
If you are lucky enough to have read about this easy, practical pricing approach in SignCraft over the years, you already know how effective it is. If not, now is a great time to start.
As one reader told us, “If Mike knew how much money I had made thanks to using his approach, he would probably want a commission!”—Editors
Mainstream companies of all kinds know that offering several options for a product increase their chances of making a sale, and often selling customers an upgraded product. Sign companies should be doing the same!
One of the most obvious examples are trucks and cars. “How much is a truck?” Despite the generic question, shoppers have the choice of light utility, standard duty and heavy duty. Choosing a standard duty? There are still options for six-, seven- or eight-foot beds.
After picking a model and size, it’s more choices. Vinyl, cloth or leather seats? A basic sound system or all-inclusive satellite radios, Internet, dash displays and so forth?
Not long ago, I bought a new truck—and I paid more for it than I had planned. At some point, I was shown one of the top-end trucks. I liked it, then talked myself into why I needed it. I bought the truck. I could tell myself I would be using the truck for the next four or five years, and I might as well go in style.
I am sure that everyone reading this article has gone through a similar experience, whether it was a vehicle, washer/dryer, pair of boots or even their cable TV subscription. With few exceptions, I would suggest that all sign companies use the same sales strategy.
Always give a potential client at least three options for every sign or related project! You will be surprised how many buyers will take the top version. And those odds go up considerably if the salesperson emphasizes how important the sign will be for their company over the next few years.
Most sign companies get requests for 4×8 construction or real estate project signs, so I’ll start with a 4×8 as an example. Aside from options for the substrate, a 4×8 could be characterized as “economy, basic or deluxe.”
The economy version might have a single color background and one or two colors of basic lettering on a full sheet of material. A basic version might include extra colors and possibly cutting the panel into more of a custom shape. The deluxe version might be similar to the basic option, but also include additional 3-D options like cutout letters for the main topic and/or a raised panel.
If you ask a client their budget, most will freeze up—hesitant to offer an amount. If you start out with a few concept options then give a few prices, though, they’ll almost always divulge a budget. So if I say the economy version is roughly $400, the standard version is roughly $600 and the deluxe version is $2000, they will often say they have a $750 budget.
At that point, I know I can design a project to hit that budget. In this case, it will be a better sign than I might have been able to sell if I offered only the standard option. Most customers are open to seeing an additional version slightly above their quoted budget.
Construction and real estate project signs are often temporary. Some clients will only need to offer basic information and contact information. The economy version might fit their needs. Price every project to make your necessary profit and be happy with the sale.
That’s the goal of any of the options: to make the necessary profit and move on. Remember, some people might only want “basic cable,” while others want basic plus a few premium stations, and others want full access. Let them decide—but always give them options!
Permanent identity signs often have higher budgets and more requirements. A sign in front of a client’s business is one of the most important purchases they make. Not all of them understand how crucial this purchase can be. Many think in terms of “how much”, without considering the advertising value.
For example, a nice sign for their business entry may cost $2400, which might sound like a lot to them. But if you explain that even if the sign only lasts two years, they’d only be spending $100 per month to advertise their business with an attractive sign at their business. They can spend $100 per month on print advertising during the same 24 months and get little exposure or return. If the sign lasts four years, their cost is only $50 per month. Most signs last that long or longer.
Once a potential client understands the value of their sign investment, they will often surprise you by selecting the highest of the proposed price points. In a good economy, upselling is easy! Remember that it will be easier for a client to understand how the various price points are related if you have examples on your walls or in your sales portfolio or tablet computer. Many clients have an ego, so give them an opportunity to display it on their business!
If you were following along, you probably noticed that I always quoted the third option much higher. Remember my $400, $600 and $2000? The higher price for the premium option gives them the opportunity to pick a price point of $1200.
Bids and upselling
Earlier I said, “With few exceptions, I would suggest that all sign companies use the same sales strategy.” Occasionally, a sign company is requested to bid on a project. In these cases, the specs for the project are usually 100% pinned down and spelled out in the bid package or specs. That’s really a time just to figure the job and submit a price. But a bidder could still add an additional quote to go above and beyond the original specs. The price may be higher, but the client might accept your better version.
You can’t escape three-tier pricing. It’s everywhere! A soft drink comes in small, medium, large and sometimes jumbo. A hamburger comes in versions with cheese, bacon, extra meat, peppers and so forth. I could go on and on, but I’ll bet you can see three-tier pricing in action everywhere.
Over the past few years, I have been offering guided photography tours here in Jackson Hole. You guessed it: I offer 4-, 6- and 8-hour tours. I mentioned spending a lot of money for a nice truck. It’s loaded with features including heated and air-conditioned leather seats. I made the choice to spend the extra money for the benefit of my clients, and after test driving the top-end model, I bought it.