17. A lesson from Aleksander Fredro – differentiate prices. On the paradox of choice

What should you do when two similar products, according to your chosen strategy, should have the same price? Will presenting such offers side by side affect sales? It turns out that it will.

Scientific research shows that when 2 similar products are available at the same price and the customer has to choose between them, sales of those products decrease¹. Why does this happen?

The first characteristic customers notice in a product is its price, and in many cases, it is the most important factor in choosing an offer. When the price is the same for two products, customers must find differences between them. Most often, they do this by identifying a feature that one product has but the other does not. Conversely, the first product may lack something that the second one has. They then find themselves in an uncomfortable situation, having to make a difficult choice. Due to the paradox of choice (well illustrated by Fredro’s fable “The donkey given two mangers…”), customers ultimately cannot decide what to buy and postpone the decision.

This theory was supported by a study in which 2 groups of people were offered chewing gum for purchase. The only difference was the price.

For the first group, the price of the gum was the same:
Price of gum 1: 0.50 PLN
Price of gum 2: 0.50 PLN

For the second group, the prices differed slightly:
Price of gum 1: 0.49 PLN
Price of gum 2: 0.51 PLN

It turned out that in the first group only 46% of people decided to make a purchase, while in group 2 it was as much as 77%. Paradoxically, differentiating the price makes the products seem more similar, which simplifies the choice for the consumer. This means the customer does not need to look for differences between the products, assuming they are the same and that the only difference is the price, allowing them to make a decision based solely on it. According to research, a price difference of just 3% is sufficient.

In summary, even a small price differentiation can influence product sales. When customers have to make a difficult decision, they prefer to postpone it. Making the decision easier for the customer by differentiating the prices of similar products can increase sales by nearly 100%.

[1] Kim, Novemsky, and Dhar, 2013, Adding Small Differences Can Increase Similarity and Choice