Why does everyone always offer three packages?

It is more common than not to see companies offering you three packages for subscription. No matter whether you are subscribing to a Software as a Service or a traditional magazine, the “golden three” packages are everywhere.

Prepare to learn why this is the case, as we make a small exploration into the world of behavioral economics.

Decision making is hard

Many people think offering an abundance of choices is a good thing. Just look at all restaurants with oversized menus. Let me ask you, was it easy to choose from that kind of menu? I’d wager no.

Why is it you ask, that we have a much harder time choosing when there are many options, compared to when there are few? The answer lies in the way we make most decisions: By comparison.

Most of the time, we don’t have a clear opinion on exactly what we want. So, we go looking for the best possible option between the ones we have.

Add to this the fact that most people are risk averse, that is, we are irrationally predisposed to try and avoid losses more than the relative change for gains.

Comparison Exercise with Three Packages

Imagine now that you have the common three packages. First a “Package A” with costs $10/month, with few features. Second, a middle package, “B” costing $15/month with the most typical features. Finally, you have a “Package C” at the cost of $25/month which offers more than the typical buyer will need.

What we are doing here is helping the user make a decision by easing the comparison. The reasoning of the typical user would go something like this:

“That Package A doesn’t really have everything I’m looking for and plus, Package B is not really that much more expensive either. However, Package C is much more expensive and while it has some nice things, it just isn’t worth it. I’ll go with Package B.”

The user has successfully, and easily, reached a conclusion about your offering thanks to the way you designed your packages.

As an added benefit we also capture the edge cases, that is, users who want absolutely the minimum and can’t afford anything else as well as users who just have to have the greatest, at any cost.

Generally: How we structure packages

In a more general manner, this translates to a package structure that is as following:

Package A

The base package should offer enough to be a sustainable product that people want, at a low price point. However, it should also leave some key features out to make the upgrade to Package B a necessity for the majority of users. Strictly speaking, all this package is here for is to make the choice of Package B easier.

Package B

The middle package is the one you want to sell. It should be priced higher than Package A, but not necessarily by a lot. Remember, we are trying to make sure that this is the “right” package for most people whereas the others are merely enticements.

Package C

The grand package doubles as a great way to sell more to the people who must have the greatest at any cost, and features that are just too expensive to maintain otherwise. Plus, this will come at a larger price increase, making most people reject it and settle for package B.

Conclusion

It is incredible how effective this strategy actually is. If accompanied with some visuals that also highlight the middle package (which is a theme for another article), users self-select this package at an incredible rate.

Is it dishonest? I would argue no unless your goal is to trick people into buying something they not only don’t want, but with features and at prices that themselves are fundamentally dishonest. If not, then all you are doing is helping people make that decision that they don’t want to make and also find tricky.

Try it and see how it works for you. My bet is that you will be positively surprised and the immediate effect a three-package strategy will have on your marketing.