Service businesses—are you making this pricing mistake?

I was Googling on my phone, looking for dance classes for my daughter when I came across the image below.

“What is this showing me?,” I wondered. I had to scroll around a bit to read thechart’s X and Y axes. My second thought was “Holy moly! This business offers an insane number of pricing options!” (315 to be exact.)

Now I’m sure this business owner didn’t create this matrix with the intention of making pricing complicated—no owner would. Instead, she likely believes she’s helping her customers get exactly what they want at a price and scheduling cadence that perfectly fits their needs. Unfortunately, good intentions don’t always make for good outcomes. By giving her customers such an extensive list of options, this owner is very likely damaging her bottom line.

In fact, studies show that presenting customers with too many options will more often than not result in no sale. That’s right—the more choices people have, the less likely they are to buy.

Most famously, Sheena Iyengar’s jam study demonstrated that customers were far more likely to purchase a jar of jam when presented with just six flavors instead of 24. Studies also show that limiting choice is not only better for the consumer but can be better for businesses as well.

On some level—however counterintuitive—it makes sense that as consumers we’re already bombarded with too many options. We live in a society of choice overload. While it’s appealing to have a huge number of options to choose from, it can certainly be overwhelming.

I was overwhelmed looking at the matrix with 315 options. And guess what—instead of further pursuing that dance studio, we continued our search and ultimately opted for gymnastics.

What mix of classes and associated price points on the matrix above are most commonly chosen? Using this data, the owner could trim down the offerings and present folks with just those five or six memberships, saving her prospects some eyestrain and headache. She might even see more new customers come through the door each month.

What about you? How do you price your services? Are you offering too many membership options? Which four or five do you sell most often?

If you use Pike13, run your “Members by Membership” report to see how many people have purchased your different memberships. If you have a membership with only one or two associated members, you might consider trimming it as an offering—your clients will find it easier to choose and it might just boost your bottom line as well!