Unlock the Psychology of Good, Better, Best Pricing: 10 Tips to Increase Your Sales and Profits

Apr 18, 2025

Offering three options leverages the psychological principle that people don’t like making extreme choices.
Some buyers will avoid the most expensive option because they are afraid of paying too much.
And they will avoid the cheapest option because they are afraid it won't meet their needs. "You get what you pay for."
Three options gives these buyers a safe middle ground between paying too much and paying too little.

With vertical differentiation, one version is clearly better or worse than another.
Who decides what better looks like? Your buyers do.
So vertical differentiation exists when buyers agree which version is better.
Here’s a simple test: Suppose two different versions were the same price. Would almost every buyer pick the same version?
“Yes” means your versions are vertically differentiated.

Differentiate product versions based on quality attributes.
These are features or characteristics that pretty much all buyers rank the same way.
For example, it’s the rare airline passenger who’d be happier with less legroom or more connecting flights on their trip.
Here are two ways to create a higher quality, and more valuable, version. First, increase a positive quality attribute (e.g., more legroom).
Second, decrease a negative quality attribute (e.g., fewer connections).

Start by designing your highest-end product.
This helps you avoid making your cheaper options too good for their price.
Identify the quality attributes of your "Best" version.
Then, to make a less valuable version, reduce the level of a positive quality attribute.
You can also increase the level of an existing negative quality attribute, or even add a new one.

Well-chosen labels help buyers understand right away where each version ranks quality-wise.
They also reinforce the idea there is a trade-off between what the buyer pays and what they will get in return.
This helps buyers justify paying more to get more.

Because the 'Good' and 'Better' options are close in price, the 'Better' option seems like a great value.
This encourages customers to upgrade from your "Good" to the “Better” option.
Making the “Best” option much more expensive makes the “Better” option seem like a good deal by comparison.
There's a segment of buyers who want nothing less than the best. For them, the much higher price signals that's what they will get.

An anchor price is a reference price against which buyers compare other prices.
It becomes the starting point in their minds for thinking about what’s a reasonable price to pay.
When you use the high price of your "Best" version as an anchor, you make your other prices look like better deals.
Buyers will tend to compare those prices to the anchor. They won't think about each price in isolation.

The "Good" version in a GBB pricing strategy does several things. First, it allows you to compete against price-cutting rivals.
Second, it lets you reach price-sensitive customers. But without compromising the pricing of your higher-value offerings.
Third, it gives you a tool to counter bargain hunters. “I can’t give you X for that price. But I can give you Y.”
It's essential your "Good" version clearly offers less value than higher tiers. Otherwise, your "Better" and "Best" options will lose their appeal.

Your "Better" and "Best" versions will attract quality-sensitive buyers. These are buyers who are willing to pay more for a better experience or results.
But you need commensurate increases in perceived value to support your higher prices. You want buyers to think, “Yes, I’m paying more, but it’s worth it."
A low margin on your “Good” version lets you reach a wider range of customers. These are the ones who may not be able or willing to pay for your higher-priced versions right now.
But, they may buy your better, more profitable, versions in the future when their needs and budget grow.

Make buyers realize they must give something up – value – to get a lower price.
The idea is that the pain of losing value will outweigh the pleasure of paying a lower price.
The end result? You enjoy increased sales of your higher-margin versions.
There is an important caveat. This rests on effectively communicating what makes an option valuable. And what the buyer will lose if they spend less.

This post is public so feel free to share it.

Pricing Pointers