This coincidence is too frequent to be one; many online services - and probably offline too - provide a pricing options that look like:

G-Suite Pricing Options

The frequency of 3+ "recommended options" is too high. It makes you wonder if there is a UX angle to this. Why not 1 or 5? Or maybe custom solution?

closed as off-topic by virtualnobi, locationunknown, Shreyas Tripathy, msanford, Wanda Oct 15 at 9:20

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    This is a sales strategy, not a UX strategy per se. For some products, people go for the cheapest or the most expensive, but for most, the largest number will be drawn to the middle, and you price accordingly. It is often said a restaurant makes its highest margins on the second cheapest wine on the list. – choster Oct 9 at 14:45
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    This is the paradox of choice. As you increase the number of options to choose from, conversions start to fall - people can't make up their mind with so many options to choose from. Three is simple - budget, bargain, premium. Most people want bargain - bookending that offering with a budget and premium choice makes the decision easy. – J... Oct 9 at 18:57
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    I'm trying to find the source of this, but there was a TV manufacturer that was having trouble selling their largest/most expensive TV. Their solution was to create a slightly larger TV, and priced it at an unreasonably high price. It was a marketing ploy. Just the very existence of the unreasonably expensive TV made consumers think that the former TV was an amazing deal. Only 5 inches smaller, but half the price?!?! What a steal! Companies will always add a very expensive option (and very minimal option, but worse "value") just to make the one they want you to choose seem more desirable. – dberm22 Oct 9 at 22:05
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    @dberm22: In marketing / economics (and psychology in general), this is called a "framing effect". It essentially means that people's choices are affected by how those choices are framed. A non-economic example: doctors are more willing to perform a procedure that is stated as having a 95% chance of success than a 5% chance of failure. And doctors are (or at least should be) far more trained in analytical thinking and statistics than the average consumer. – Jörg W Mittag Oct 10 at 7:07
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    I'm voting to close this question as off-topic because the answer is not about UX, but about sales strategy (as the comments clearly show). – virtualnobi Oct 10 at 18:51
up vote 73 down vote accepted

The Three-tier Pricing Strategy always works because often customers don't know what they need.

So in one simple chart, you show them what they can get for different prices. They feel like they have a choice and do not feel like they are being swindled. You want to do business by making the majority of them choose the intermediate one.

The Three-tier Pricing Strategy

Much like many websites offering their services:

Example Plan

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    The illusion of choice :) – Franchesca Oct 9 at 12:55
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    And the paradox of choice. Too many and they regret not being able to choose all the others or become paralyzed with indecision. Too few and they don't feel like they were allowed to exercise free will. – Nathan Rabe Oct 9 at 13:15
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    @Franchesca It would only be an illusion of choice if they ended up with the same thing no matter which option they chose. That would be illegal in some countries, and in almost all countries I imagine it would result in extremely negative publicity and backlash from your customers. – Anthony Grist Oct 9 at 13:32
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    @AnthonyGrist Deliberately providing users with choices that you know they will never choose due to high cost or lack of useful features is what I would consider as giving the "illusion of choice". – Franchesca Oct 9 at 14:02
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    Good TED talk of paradox of choice / choice paralysis: youtube.com/watch?v=VO6XEQIsCoM – mowwwalker Oct 9 at 17:40

There are a few reasons behind this...

Implicit Option

If a customer is deciding whether to choose your product or not, and there is a single option available, then the choice is binary. They can choose to buy it or not.

If you present 3 choices, then they tend to forget about the implicit option to not buy the product.

Centre Stage Effect

When 3 options are presented, people tend to choose the middle one. This effect is known as the centre stage effect.

In their article 'Preferring the One in the Middle: Further Evidence for the Centre-stage Effect', researchers Paul Rodway, Astrid Schepman and Jordana Lambert of the University of Chester, UK analyze three separate but related experiments in which they tested the association between the location of an item in a series and how often that item is selected as preferable over other choices. The results indicate a clear tendency toward favoring items located in the middle of a row -- regardless of whether it runs horizontally or vertically. original article

My expertise is in motivation theory and educational psychology, so I'll offer my 2 cents up from that perspective then on to the big picture.

This is a very old and well studied psychological effect. In its simplest form, it is used by parents and teachers regularly:

Scenario 1: Do it or else. You give a kid the choice between doing an assigned activity or chore and the alternative of a consequence for not doing it. This method is generally considered 'confrontational' by teachers since it sets up a possible divergence of goals between the adults and kids. It also suffers from the classic mistake of adults consciously offering a choice (don't do it should never be offered as a choice!) that is not a desired outcome.

Scenario 2: Choose your favorite. You give a kid the choice of two different activities. Both are activities the adults would value as appropriate outcomes. Kids feel empowered by the ability to choose their favorite and are happy to cooperate. Whichever outcome the student chooses will leave the adults and kids with their goals aligned, namely that we want kids to be successful in appropriate activities. You do not have to convince, coerce, or confront.

What about those online sales strategies?

Curated choices: As applied in a sales scenario, you should never give the prospective mark, er .. customer, the choice of not doing business with you. That is a foolish choice to offer your customers. They know they have that choice. They can walk out of the store or click off of the website anytime, but the salesperson should not be the one 'offering' that choice. Anyone who ever watched "Miracle on 34th Street" will recall the horror of the Macy's sales executives when they learned that their Santa was sending customers to Gimbel's!

Allow people to be themselves while they give you money. Certainly it is important to do business honestly and offer a valuable service at a market price, but there is more to it. People are not machines. They don't sit around ruthlessly calculating the best deal. They want to be impressed. They want to be sold to!

Instead of yes/no choices, you offer choices that inspire customers to go towards their natural tendencies, whether it is thrift, seeking the gold-plated doodad, or ruthless efficiency. Offering discounts on yearly subscriptions is an example of appealing to efficient people. Not coincidentally, those are the more 'logical thinkers,' the same people who are less influenced by the "ooh, pretty!" (luxury-seeking) and "dam, that's cheap!" (thrift) options. Careful, however, with the number of choices, since too many choices makes decisions noticeably more difficult and will drive away customers who get confused and do not see a clear path to their favorite deal.

Leave nothing to chance. The more you plan, the more YOU PLAN ... instead of somebody else! Nobody will care for your business as much as you, so do as much of the thinking and planning as possible. You will often see that one choice is setup as the default choice. The times you don't notice it, I suspect it is there anyway and I would look closer. Not having a choice or path preselected is almost as bad as offering the choice of yes/no.

So you lead them down the path where they can relax (effortless and entertaining, please) and look around for their preferred options. Generally, you want people to take it easy and make emotional decisions. The more people are asked to think, the more they will choose something you would prefer them to avoid. This is the reason so much of our advertising is mind-numbingly stupid. If you lead them right, on a pleasant path, and have the right options, people who are in the market for your service will subscribe at a much higher rate.

This is the basic version, of course. There are many books and courses offered in business, sales, psychology, and leadership programs all over the world. I suggest Google keywords of [psychology, sales, filtering, decision, options, choice] and look for reputable companies or universities. Interestingly, when you search for information about this topic, you will be inundated with sales pitches yourself. Life is so interesting ...

As already noted in some comments, the three-tier product range design has both psychological and economic reasons. I would like to explain the economics a little more.

One Tier

Imagine you want to offer a service with only one tier. How do you price it?

Your market research shows that you will have two groups of customers: professionals who would use the service daily, and casuals who only use it a few times per month. How would these two groups value the service? Obviously the casuals would value it lowly, while the professionals would be willing to pay rather high price.

If you charge the professional's price, then you would not acquire the casuals as customers because you are too expensive for them. And if you charge the casual's price, then you don't make as much profit as possible. Perhaps you might not even appeal to them since you are too cheap.

Charging everyone a middle price is merely compromise - you will still not acquire the bottom of the casual market, and you could still get more money from the professionals.

Two tiers

The obvious solution: create two tiers, so you can charge customers from each group as much as they are willing to pay.

But you can't simply charge two prices for exactly the same thing. So you must create two versions of your service: either takes some features away from the casuals that they don't need, or add some extras for the professionals.

Three tiers

In similar situations, the market might have more than two user categories. We also get back to the psychological aspect: binary choices can be difficult. So you create three tiers.

Second order price discrimination

This concept is called second-order price discrimination: using different tiers of the same service, you charge each customer what he is willing to pay. Basically it is the same reason why airlines have different seat categories, or cars are available in multiple versions, ...

For a more elaborate explanation, I recommend the book "Information Rules" by Carl Shapiro and Hal Varian. The book also says that too many tiers will overwhelm customers (looking at you, Ubisoft) and that the best number of tiers, if you don't know better, is probably three.

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    Having an odd number of tiers is helpful because many people imagine themselves to be "average", and will thus gravitate toward a middle tier. In some other scenarios it's necessary to explicitly discourage this tendency. For example, agencies placing bollards on bike paths (to prevent use by larger vehicles) avoid using even numbers of bollards, since that would create an odd number of lanes, allowing cyclists from both directions to choose the center one (oops!) – supercat Oct 10 at 19:25
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    Just wantes to comment that ubisoft doesn't do tiers, really. Tiers are expanding; A, A+B, A+B+C, A+B+C+D etcetera. Ubisoft branches off a lot with exclusives. For example A, A+B, A+C, A+C+E, A+B+D+E, A+E+F. So there is no option to just get the whole A+B+C+D+E+F package. That's what pisses people off. – PixelSnader Oct 13 at 9:22
  • Here's the relevant Wikipedia entry: en.wikipedia.org/wiki/Price_discrimination#Second_degree – icc97 Oct 15 at 8:25

Its all different manifestations of cognitive bias.

Every human is effected by cognitive bias, thereby it is a factor in all human transactions.

Which is definitely fundamental to sales/marketing because you are selling and marketing to humans. This is a step in an overall transaction in which cognitive bias is used to influence a human to seek out an interaction with an interface to facilitate and resolve the transaction.

Human interfaces, web or otherwise are designed to facilitate a real world transaction. Every interface is intentional, it is a vital step in facilitating and resolving the transaction.

This is why the science behind successful IA/UI/UX designs is largely based in cognitive bias. The decisions you make in designing a human interface are founded in leveraging human cognitive bias (hopefully to the benefit the of user) to increase the success rate of resolving the transaction.

So please, use your powers for good :)

Some interesting reads

https://en.wikipedia.org/wiki/List_of_cognitive_biases

https://uxdesign.cc/the-importance-of-cognitive-bias-in-experience-design-66feeef50c5b

https://www.winwithoutpitching.com/leveraging-cognitive-biases/

  • Cognitive bias is a huge field. Is there a specific type of bias which leads to this UX decision, to present precisely three choices to a prospective buyer? – Jon of All Trades Oct 11 at 13:32

This is an example of the decoy effect, as mentioned by others already. One always wonder why there is always three choices, as it is used to sway the potential buyer into either directions of the attributes (e.g. cost, features), by catering to the user attributes. Take a look of this link on the example, and some famous use of decoy effect by many companies that we need come to contact with.

enter image description here

Image Source: HumanHow

enter image description here

Image Source: Economist

Unfortunately this comes down to working memory, and frustration. The human brain can handle 5 plus/minus 2 items on average.

If your feeling pretty stressed out, didn't get a lot of sleep, are ill, are distracted by something at home, or otherwise off your game - then you've probably only got 3 slots of available focus.

On another day, you are well rested, you've being practicing various focus techniques, you are not distracted with various emotional concerns, you are healthy and have no unmet needs. You probably have 7 slots available to use.

Note: these slots are highly variable, some people will have three slots when they are interacting with someone new, but 7 slots when reading a science article. Or it could be the other way around. But generally 3-7 is a good heuristic.

So now you look at their product offers. If they only have three prominent options just about everybody is going to be able to handle the situation without becoming frustrated. For those with only three slots available the brain will start using its heuristics, and:

  • probably pick the big one in terms of overall screen real-estate. (Hence the default options tend to be illustrated large)
  • pick the plan big enough for your own usage, but only just so. (which is why they are ordered so that you can scan across a table to find the next largest, and why the top tier is usually unlimited).
  • pick a plan at random because, something is better than nothing. (and those prices are all acceptable).

Now that something has been selected, two slots become free and the person can query it, and make sure its not obviously wrong. It might not be best for them, but at least its not bad for them. If they are rushed though they may not spend those slots on questioning their decision, and just move onto one of their other issues. In this case the person is trusting those cognitive biases to get by.

But if you've got more spots available you can ask more advanced questions. Also by definition this also means your not distracted, pressured or otherwise rushed. Three in this case is just large enough that you can use 2-4 slots for getting in depth about a topic, but still have all those options in mind. Remember that a user who drops an option to follow a query is going to be frustrated because they "forgot" x.

The more frustrated a person becomes the more they are going to drop, because now slots are being used by emotional issues. When a person drops too many items too quickly the brain considers itself in a state of emergency and literally runs from the issue. Ever found yourself avoiding something because its "hard".

This is particularly difficult with hard issues, like selecting a phone, or internet provider because most people haven't been taught how to do it. The internet really isn't that old. Mobile phones came on even later.

Now again its about the size of working memory, its 3-7 roughly 5 which means to be 50% confident that you've seen a good sample of what exists, you will have seen 3-4 different offerings. If you've been told that those 3-4 offerings represent the least, the average, and the most then you've actually sampled the entire space. Which gives you confidence that you're not dropping anything. Thus it actually avoids frustration from feeling like something has been missed to.

It is no wonder with both sets of forces that most decision are reduced down toward 3. Even in other areas like a ribbon bar. You'll notice the best ribbons have three big sections, then three smaller sections, etc, until a choice is completely made. Also notice that menus that starting going further than 3 deep start to feel clunky/wrong. Its because your now pushing ideas out of working memory.

I'm going to suggest it's something less strategically motivated.

This to me just looks like an extension of the "Small, regular or large?" question you get when you ask for a Coke or fries at a fast food restaurant. This suits every average person and is what you'd expect at a walk-in - whether real or virtual - store.

I'm not suggesting the centre-stage, illusion/paradox of choice and decoy strategies others mention aren't in play in some circumstances, but Occam's suggests its not always the case.

I may be wrong but in the provided example I'd expect the first two options to have take-up. Sole proprietors/soho users would like the basic option; think invoices/flyers and a bit of storage. SMEs would go for the one in the middle; price isn't crippling and infinite storage/archive. That last one is looking a bit decoy-ish.

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