I have a passion for design patterns. I like to understand the reasons why certain patterns work and dislike using conventions without knowing why they have become successful.
Recently I’ve found myself interested in the psychology of persuasion and the ways in which certain techniques have infiltrated the web. One such technique is the “Goldilocks Effect”. I’ve been aware of it for a while but had only ever thought of it as just another design pattern and hadn’t necessarily thought to understand the psychology behind it.
What is the Goldilocks Effect?
The term ‘goldilocks effect’ derives from the children’s story “Goldilocks and the Three Bears”. In the story Goldilocks decides, amongst other things, to eat one of three bowls of porridge; the first being too hot, the next too cold, but the final one she picks for being “just right”.
This, in a nutshell, is what the term goldilocks effect or ‘goldilocks pricing’ refers to. It is used to describe the practice of providing a premium as well as a budget option alongside the regularly priced product to make the standard option seem more appealing. A good example of this is the basic pricing structure adopted by most airlines. They encourage customers to see business class as good value by offering higher priced first class and economy options alongside it. A more everyday example can be seen in all mainstream coffee shops where the options range from small (tall) to large (venti), with regular (grande) in-between. The goal of this type of pricing is to push people who might usually buy the cheapest into buying a more expensive option.
“Third-class railway carriages in Victorian England are said to have been built without windows, not so much to punish third-class customers (for which there was no economic incentive), as to motivate those who could afford second-class seats to pay for them instead of taking the cheaper option.” Wikipedia
This technique for encouraging a more favourable transaction exploits our psychological aversion to extremes (a type of cognitive bias). Basically you can manipulate people into choosing the option that yields the greatest profit by providing them with three options (e.g. small, medium, large) as long as the item you wish to sell the most of is centered within the range.
Interestingly some economists have argued that the goldilocks effect constitutes a form of ‘pricing discrimination’ where premium pricing to encourage people to upgrade their purchases leads to providers intentionally worsening the quality of their ‘basic’ products to fit the model.
I witnessed the goldilocks effect in action last year when user testing a travel insurance website. Following the quote process the participants where presented with 3 options, and even though most of them had mentioned price as a key factor in their decision making when purchasing insurance the vast majority commented that, even though there was very little difference between the products, they were more likely to purchase standard or premium over the cheapest option as they felt that by doing so they would be “even more insured”. Interestingly some users went as far as to show distrust, not of the brand, but of the lesser option.
Three is the magic number
Although in the children’s story Goldilocks is confronted by three options the pricing technique doesn’t necessarily have to be limited to that number. It does, however, make sense to limit the options as there’s less chance of overwhelming the customer with choice while also providing just enough for the technique to achieve its desired result.
Goldilocks and the four bears
While looking for examples I found a couple of instances were four products were shown. Rather than just show each option equally alongside the next, one of the central items would be highlighted as the ideal or ‘most popular’ choice. By visually separating out one of the central options they reduce the chance of choice paralysis. I accept that choosing from only four options is not exactly excessive but I do believe it has had enough of an effect for the companies to feel it necessary to highlight one.
How to use the Goldilocks Effect successfully
So how can you utilise our natural aversion to extremes to encourage a transaction? I don’t consider myself an expert in this but I thought I’d share some of the ways I think you can use the goldilocks effect.
- Limit the number of options – ideally keep it limited to 3, although more can clearly work, too many could cause choice paralysis.
- Clearly show the comparison between each product – make the users choice clear by placing each option side by side
- Highlight the similarities and differences between the features and benefits – make sure the differences between each option is clearly displayed; what are the features or benefits? How is the higher price justified?
- Ensure product labels follow a consistent theme – SurveyMonkey for example use basic, pro and unlimited. Getsignoff uses audience types; freelancer, team or agency. With Getsignoff there is in-fact a forth option (free) but they choose not to place this alongside the paid for services.
- Use social proof to support the sell – as shown in the Basecamp example above highlight which option is the ‘most popular’ with your customers. By emphasising the choice made by the majority of people it reinforces that the middle option is the best, if everyone else is choosing it, it must be right.
I hope you’ve found this introduction useful. If you’d like to see more examples of the goldilocks effect in action I’ve put together a collection which I’ll be updating so If you know of any other examples please feel free to share them.
I’ve put together a collection of examples of the goldilocks pricing pattern on UI-Patterns.com so please check it out.