In the summers of 2016, I saw an advertisement for Dewan motors. They are the authorized sellers of BMW CBUs in Pakistan since BMW is not assembled in Pakistan. The 4 million Rs price tag for their 3-series caught my instant attention.
This was cheaper than any other German car brands available in Pakistan for similar compact sedans. Audi A4 prices began from 6 million Rs while Mercedes C-class started from 8 million Rs. BMW obviously caught my attention. So I visited their dealership in Islamabad.
After discussing the car further with the dealership, I realized that my attention has been captured by a cheap price but the dealership has no intention of selling it cheap to me. The 4 million Rs 3-series came with absolutely no features. It was a manual transmission, without climate control, sunroof, or even a cigarette lighter/power outlet. There wasn’t even a paint selection option and the car was offered to be shipped as “Alpine White”. It was a Corolla XLI equivalent of BMW.
The automatic transmission alone was for 1 million Rs. Adding other basics to the car, raised the price up by another million. At this point, I realized that the 4 million price point was advertised only to get me to the dealership. I didn’t buy the car, but I learnt a bit about sales.
In e-commerce, some sellers advertise “Free + Just Pay Shipping” offers. The obvious intention is to sell $1-2 goods for for $0 + $10 for shipping. The same product can also be advertised as $10 with free shipping. However, a split test will prove that the Free+Shipping offers convert better. Because we’ve never been interested in $10 price-point, we’ve never advertised F+S offers, but we do play with this particular area of human psychology in order to get the best value. Let’s explore this further.
If you want to sell something for $25, you could offer it as $25 with free shipping, or for $19.95 with $5 shipping. You’d still get the same $25, but your conversion rates will vary. While there’s no rule of thumb here, but we’ve often seen that it’s better to offer $25 + free shipping to customers in US as they feel entitled to free shipping, and one can advertise $19.95 + $5 shipping to customers outside of US without hampering conversion rates since they are conditioned to pay for shipping from a store that’s not operated in their country.
However, my favorite example is the “Dollar Shave Club”. It was advertised as such that no one should ever need to spend more than a dollar to buy a razor. Except that their cheapest offering which is $1 razor called “humble twin” shipped for $3 including the shipping while they offered free shipping on their other, more expensive blades.
They also called their cheapest blade as “humble”, and others fancier names terming their mid option also members’ favorite. But all of this was only when they had just launched. In the present state, you’re bound to spend 10s of dollars, and that too on an on-going subscription basis. Let’s have a look at what they’re doing today
What is advertised as Dollar Shave Club, now creates a “personalized” basket of goods for you after taking you through a “quiz”. Instead of $1, they attempt to upsell to $42, and bill that every 2 months.