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The Goldilocks Effect

Goldilocks effect can be described as our tendency to pick the middle option believing that it is not too easy or not too difficult. Similarly it can be discussed as our tendency to select things that are not too simple and not too complex, but fits our requirements perfectly. Well, as you have assumed, this name was derived from the story of the Goldilocks and the Three Bears in which Goldilocks picks the bed, chair and food that are just perfect for her size.

According to the psychologists, the reason behind the Goldilocks effect is easily understandable. Well, generally we don’t like to pick options that are too easy or below our capability level because we don’t like doing easy things again and again. On the other hand, we don’t like to select options that are too difficult because we don’t like spending our time and energy on things that are difficult to accomplish.

Table of contents:
  1. Goldilocks pricing and Conversion Rate Optimization (CRO)
  2. The Netflix's way
  3. Top tips
  4. Final thought!

Think about it! Why do you think computer games are absolutely famous among many people? Apart from the other obvious reasons, the fact that computer gaming supports the Goldilocks effect is a considerable reason towards their fame. For example, the challenge levels of the video games are adjusted based on the player's competence, making sure it's neither too easy nor too hard for the player. Goldilocks effect can be actively seen in action in the context of psychology, engineering, economics and even in marketing. The role of Goldilocks effect in marketing to influence consumer behavior towards the Conversion Rate Optimization (CRO) is somewhat magnificent.

Goldilocks pricing and Conversion Rate Optimization (CRO)

The principle of the Goldilocks effect affects digital marketing in terms of pricing, known as the Goldilocks pricing. It can be defined as a psychological strategy of pricing that is mainly concerned with product differentiation and comparative pricing. For example, you can differentiate a product or a service by adding extra value added features and also by removing certain features to ideally divide a single product or service into three sections. Then set price points as to package them giving the impression of 'basic package', 'standard package' and 'superior package.' The ideal price point should be set to the standard package. Now, your customers have three options to choose from when buying your product or service. First of all, as humans we love having options in decision making. Therefore, giving a few options for your target audience rather than offering a single option definitely motivates them to act positively towards Conversion Rate Optimization (CRO). Second of all, as the result of the Goldilocks effect, it's highly likely that they select the middle package.

The Netflix's way

It's not a secret that Netflix offers three plans for subscriptions as the basic package, standard package and the premium package with three price points. The basic package is discounted with poor video resolution and the premium package is too expensive for the value. On the other hand, they try to make the standard package appear more appealing than the other two. What do you think is the ultimate purpose of Netflix's cause of action? It indeed is to further the case of the Goldilocks effect. Netflix's target is to drive more leads towards the standard package and thanks to the features embedded; the customers feel the basic package to be too worthless for the discount and the premium package to be too expensive for the features. Finally, the customers choose the standard package as the best option.

Top tips

To leverage the Goldilocks effect towards the Conversion Rate Optimization (CRO), change your pricing strategy as stated below.

  • Select the ideal price point reflecting the value of your product or service.
  • Add a few slightly better features to the product or service and set a proportionately higher price point for it.
  • Remove some considerable functions from the original product or service and set a proportionately lower price point for it.
  • Introduce the three packages hand in hand by highlighting the key values of the middle package.
  • Finally, your customers are given three options hence it compels them to make a move. And it will be towards the middle package as per your desires thanks to the Goldilocks effect.

Final thought!

The Goldilocks effect is a cognitive bias of us to see the middle option out of three to seem more fitting over the others assuming that it's neither too simple nor too complex, but just perfect. This cognitive bias can be used in the context of marketing to influence consumer behavior towards Conversion Rate Optimization (CRO) by coupling it with a trapping pricing strategy.

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