To Sell More, Try Selling Less
Pricing Pointers, Issue #62
A bare-bones pricing strategy is a practical approach to capturing budget-conscious buyers while establishing a reliable path to higher-margin accessory sales.
By offering a stripped-down model of your product at a lower entry point, you can win over customers who might otherwise walk away due to price.
However, converting these low-margin entry-level sales into a profitable system requires a deliberate design. To build this foundation successfully, you must first craft a core offer that is accessible and highly focused on the essentials.
Attract Price-Sensitive Buyers With a Compelling Base Product
Your base product should attract price-sensitive customers who are primarily concerned with affordability. To achieve this, its features and functionalities should be kept to a bare minimum—offering only the essential elements that every buyer expects. To put it another way, these should be things that, if they were missing, would kill the sale.
To make your base product appealing, keep its profit margin slim. The more likely buyers are to supplement their purchases with other items, the more aggressively you can discount the base price. For example, you could price it at cost and make your profit on the follow-on items buyers add to their purchase.
It’s just like an entertainment venue that keeps ticket prices low to attract a crowd, knowing the real profit comes from concessions and merchandise.
For instance, a luggage company could offer a “bare-bones” suitcase with basic features like in-line wheels and a telescoping handle. This base model caters to budget-conscious travelers.
Supercharge Profitability With High-Value Add-ons
While the base product targets price-sensitive buyers, strategically-priced add-ons target buyers who want a better experience or results with their purchase. Price these enhancements relatively high compared to their production cost, effectively compensating for the lower margin on the base product.
In the luggage example, the company could offer add-ons like a packing cube system, a detachable laundry bag, a personalized luggage tag, etc. By pricing these items high relative to their cost, you can generate substantial profit margins from customers who are happy to pay for extra features and customization.
To further maximize profitability, you could offer a set of add-ons bundled together at a slightly discounted price compared to purchasing them individually. For instance, you could bundle the packing cubes, laundry bag, and luggage tag into a single “Traveler’s Kit” that costs less than buying each accessory separately.
Encourage Upselling by Keeping Add-on Prices Low Relative to the Base Product
Present add-on prices as relatively low compared to the initial purchase to encourage these extra decisions. Ideally, each add-on should have a low price relative to the base product, but a high profit margin relative to its cost.
Customers are often more receptive to smaller additional costs after committing to a larger purchase. However, avoid excessive add-on costs that might make them reconsider the entire transaction.
Consider keeping the combined value of the add-ons in a buyer’s shopping cart to roughly 20% to 25% of the base price. To be clear, this refers to the total extra cost a single customer takes on in one transaction, not the combined price of your entire catalog of accessories. This isn’t a hard-and-fast rule. It’s an aid to get you thinking about the psychological impact of cumulative costs on your buyer’s final decision.
To drive these extra sales, you can strategically present your add-ons at the exact point of purchase. Remember when you ordered a sandwich and were asked, “Would you like to add a cookie for only ninety-nine cents?”
Alternatively, you can follow up a few weeks after the initial purchase to offer your add-ons. Once they experience the minor inconvenience of travel without your accessories, their value becomes obvious to them.
Put Modular Pricing into Practice
I began with a promise: that you could capture price-sensitive buyers without sacrificing your overall profitability. By walking through how to build a compelling core product, leverage high-value accessories, and use the psychology of pricing, you now have a practical roadmap to do exactly that.
Instead of building a bare-bones product from scratch, look at what you already sell. Strip out any non-essential features until you are left with a lean, core offer. Then sell those removed components as optional extras. This simple act immediately creates an entry point that is highly accessible to new buyers while paving the way for profitable add-on sales.