We all know that a one-size clothing store will not fit the needs of every potential customer wanting to buy clothes. That’s because often one-size or an average option doesn’t end up fitting anyone. 

Nowadays buyers have so many options available. When every offering can be tailor made to fit your specific needs, you won’t want to accept a mediocre alternative. As a business owner, you should instead try to identify the kinds of customers you want to target and tailor your products to fit them specifically. 

Multiple Options Helps Understand What We’re Paying For 

Offering multiple options allow for you to meet the specific needs of more customers. In addition, it allows you to provide clear, distinct choices that make comparing these different options simpler. This is especially important and useful in services where the value isn’t always immediately visible or tangible, which is what tends to be the case in creative fields. 

When you provide clear, distinct options, such as “good”, “better”, and “best”, it does two things: 

It highlights the value behind the price.  

Instead of just seeing the number, customers see what they get for that number. 

It shifts the focus from “how much does it cost?” to “what do I need or want?”  

That shift in mindset helps customers feel more in control and leads to more confident decisions 

Adding a third premium option makes the middle option seem the most attractive. 

What Is Aversion to Extreme Options? 

Consumers tend to avoid options that are in the extremes, either too cheap or too expensive. Instead, they gravitate towards the middle option. This is a well-known psychological principle in pricing strategy and consumer behaviour, described by Daniel Kahneman and Amos Tversky in the Prospect Theory. 

Why does it happen? There are several natural instincts that guide this behaviour. Risk avoidance, desire for balance, and lack of confidence can all play their part. We listed the basics down below, but we talk more about the magic of the middle option in this article. 

We Want to Avoid Risks 

When we evaluate between three different options and three different price points, we feel like the extreme choices are riskier. The cheapest option may feel low in quality. On the other hand, the most expensive option may feel like overpaying or overindulgent. 

We Desire Balance 

People want a balance of value and quality. The middle option feels like a “safe bet” that avoids regret. 

Lack of Confidence 

When customers don’t fully understand what they’re buying, which is common in services, they prefer not to gamble. The middle choice becomes the default. 

How Do I Apply This in My Business? 

You can strategically design three-tiered pricing using the “good”, “better”, “best” model. It goes as follows: 

“Good” - The Basic Option: Covers essential needs at a lower price. 

“Better” - The Anchor Option: Most balanced offer. This is often the one you want most customers to choose. 

“Best” - The Premium Option: High-end and expensive option with added features or exclusivity. This option might not sell much or at all, rather its purpose is to make the middle option look more interesting. 

By using the model, you can guide customers toward your ideal offering and highlight value without pushing customers to extremes. It has also been shown that this model increases average spend, as customers are likely to spend more than they intended by avoiding the “cheap” option.