This article continues the series focusing on improving sales in your parkour business. One powerful strategy business owners can roll out before the sale negotiation even begins is known as price anchoring. This psychological tactic can help parkour gyms, Parkour apparel brands, shoe brands, coaches, and other related parkour businesses boost sales and enhance profitability.
What is Price Anchoring?
Price anchoring is a marketing strategy where a higher-priced product or service is presented alongside a lower-priced option to make the latter appear more attractive. The higher price acts as an "anchor," influencing customers' perception of the value of the lower-priced option. This technique plays on the anchoring bias, where the initial price point affects subsequent price judgments.
How Price Anchoring Works
When customers see a high-priced option first, it sets a benchmark in their minds. The lower-priced product then seems like a better deal in comparison. This relative pricing effect can drive sales by making customers feel they are getting more value for their money.
Parkour Gym Example
At Freedom in Motion Parkour gym in southern California, the sales team is trained to offer their highest-priced method of attending the gym as a member. Clients may pre-pay for four months of membership all up front in exchange for some additional perks. FiM calls this the 4-month offer.
Once clients see the membership type they want, like the once-a-week or twice-a-week membership, and it's presented to them as a 4-month lump sum, the price is often in the $800 - $1500 range. Many parents predict their kids will stick with parkour for at least four months and immediately take us up on this offer with no down sales. Other parents, however, and shocked by the price. The sales team spots that and says, "No worries, let me show you the standard weekly price," and turns the page in the pricing binder to show the membership with only the weekly price, which is now below $100 per week. This gym is priced in the premium category; the client has been anchored a premium price multiplied by 16 (weekly price over four months), and now any down selling to only the weekly pricing will feel like a big relief for the client, making the "premium" pricing feel like "best value" pricing.
Price Groups
When pricing comparable items, there are four categories to keep in mind. They are the Lowest cost, the best value, premium, and luxury. When setting a high price for your price anchor, aim for luxury and offer pricing at the premium or best value tiers as a down-sell in case the client is unable to or is interested in purchasing the lux option.
Lowest Price $ I'll use popular shopping brands to provide an example of a company using this price group. Walmart Is the best example of a large company priced in the "Lowest Price" competitive pricing position. Offer the bare minimum needed to solve the customer's problem while charging absolute rock-bottom pricing. Great for retailers like Walmart, who are okay with making just a few cents per transaction because their 10,000 transactions per day add up. Parkour brands are advised to avoid focusing on this price group.
Best Value $$ Target's competitive pricing position Offer pricing that seems reasonable and accessible but not the cheapest. The products or services solve the core problem and also come with an extra layer of thoughtfulness, utility, design, or convenience over the lowest-priced options. Most parkour brands are priced here, yet they still struggle financially. Large sales volume or low overhead costs are needed in this price bracket for survival.
Premium $$$$ Nordstrom's competitive pricing group. Completely solve the client's problems in such a way that addresses their needs, is speedy and convenient, and leaves them feeling connected to a brand they are proud to associate with. It's likely the best quality the town or region offers with a price to match. Parkour brands are recommended to price here for the best chance of survival.
Luxury $$$$$$$$$$ Louis Vuitton's competitive price strategy. The absolute highest quality, speed, convenience, and brand appeal possible. The price might be so high that most buyers find the price-to-quality ratio to be a bit absurd: "Who would pay that much?" However, folks with money to spare want the best of the best and are willing to pay wild sums to shop for the brands that support their identity as elite people. Selling things to rich people, in a nutshell.
Implementing Price Anchoring in Parkour Businesses
Retail Prices
Gym Memberships: Display three gym membership options, with the highest option's price in the premium or luxury price group as your price anchor. Use the other offerings as a down-sell in the lower groups.
Competitive Price Comparison
Apparel and Shoes: Choose a main price group for your brand, such as the retailers in the above example. Compare your prices with the prices of a competing brand one level above yours. Justify your prices based on your quality, product performance, and other unique selling points, and compare your brand to an overpriced option.
Coaching Services: Offer a coaching package that includes one-on-one coaching, accountability, meal plans, and the absolute full package with a luxury-level price to match. Stress the unique benefits of parkour training, such as full-body fitness and fun. Use your other more typical prices in the premium and best value groups as down-sell options.
Package Comparison
Membership Tiers: Offer multiple membership tiers. For instance, present a basic membership at $175/month, a standard membership at $225/month with added benefits, and a premium membership at $375/month with exclusive perks. Most customers will gravitate towards the middle option as it appears to offer the best value.
Event Pricing
Workshops and Camps: If running a parkour camp, present the full price of attending all days versus the cost of attending individual days. Show significant savings for the full package.
Tips for Effective Price Anchoring
Visibility: Make the anchor price highly visible and ensure it contrasts clearly with the discounted price. Consider making a pricing binder to visually display your core offerings or showing comparable pricing next to your products.
Simplicity: Keep your pricing structures simple and easy to understand to avoid confusing potential customers.
Highlight Value: Emphasize the benefits and additional features that come with the higher-priced options to justify the anchor price.
Price anchoring is a powerful tool that parkour business owners can leverage to enhance their sales and profitability. By strategically presenting pricing options, parkour gyms, apparel sellers, and coaches can create compelling value propositions that attract and convert more customers. Implementing these techniques can lead to significant growth and success in the competitive market of parkour businesses.
Need help setting or correcting your prices? Book a call with Motion Mentors, and we will be happy to jump in and offer our advice.
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