The Effects of Partitioned Prices


An interesting new paper profiled by this Harvard Business School article examines the effects of partitioned pricing.

We suggest that a "simple" all-inclusive price will lead buyers to focus on the main benefit offered, while partitioned price formats (main price + other charges) stimulate people to look into the details of what they get for their money. Thus, price framing can be used as a tool to induce consumers to acknowledge additional points of differentiation: a convenient shipping method or a useful service plan, for example. But to partition the price in the hope that consumers will be fooled and overlook small fees altogether can only backfire.

This is a good thing to think about for entrepreneurs entering a market via a differentiated offering. A different pricing strategy could call attention to the differentiation.

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  • A great example of this is the approach uses. It starts out easy enough with a simple price, and then anything extra winds up being a ton of money. One extra user? $10 more! On a package that only costs $15, that’s a boatload of money! You literally can wind up paying them almost $500 per month if you select all options.

  • Yep, line item pricing usually results in line item vetos.

    Unfortunately, it usually results in the loss of the product/service’s gestalt as well.