How the Goldilocks Principle works in marketing
Echoing the sentiment of the well-known fairy which it is named after, “the Goldilocks principle” has been applied to numerous areas of science from astro-ecology, medicine and economics. It was popularised in cognitive and developmental psychology after it was identified a child’s preference to choose events that are neither too simple nor too complex according to their understanding of the world. Effectively picking something that is “just right” to them.
This principle can be seen within adulthood and consumer behavior with the adult's understanding of the world changing to incorporate pricing, feature lists, perceived value and a range of other factors. Ultimately every consumer choice is made with perceived value, meaning they always want the one that is “just right”.
Applying the Goldilocks Principle to Digital
Applying the Goldilocks Principle can be hugely effective and you can see it been applied across the web with numerous examples from delivery and bundle options, subscription models and most prominently in Saas companies.
The key to success in the application of this principle is the understanding of your users. You need to know what’s the most important thing to your users at the point at which you are trying to effect and identify the extremes of this, the “too little” and “too much” options.
The extremes need to offer options that ultimately don’t fulfill the primary need of the user. For example, the “too little” extreme may provide a basic service that saves time on a particular task, but without additional features the impact is minimal or has additional implications. While the “too much” extreme gives the user the service they want but also a bunch of additional benefits that don’t impact them in the slightest.
Identifying these two extremes allows you to create a goldilocks proposition. Placing the desired outcome in the middle increases its appeal and makes the choice easier for users. This increases the perceived value of the service/product you are offering.
When combined with the correct pricing strategy this can be a highly successful and lucrative way to increase sales.
Combining Goldilocks with pricing strategy
Many view the Goldilocks Principle as a pricing strategy but that is a misconception. It is a value based strategy that allows you to better price your offering.
Once you know what is valuable to your use and have created your “too little” and “too much” option you need to know how to price them. Note: all of this should be in line with your business plan and profit margins.
Your “just right” should be your ideal price point. Provide the best value to your users and usually drive the most profit to you as a business. From here the difference from here to the “too little” should be about half as much as it is to the “too much”.
Because of the close proximity in price between the “too little” and “just right” this creates a shorter jump in the user's mind. Making it an acceptable increase, however the larger increase to the “too much” is amplified making this unacceptable. Reinforcing the “just right” as the perfect option.
Examples of Goldilocks Principle in the wild
With such a stark change in pricing, Hubspot has done a good job at making the “too little” option a non-starter for most users. Although the features are still useful the low price suggests that this package isn’t worth much, making the user automatically think it won't solve their problems pushing their focus to the others.
This is then combined with a much greater feature list, reinforcing the value associated with the “just right” options.
Almost a classic example of the Goldilocks Principle. SEMRush gives a significant increase in features from the pro to the guru packages but the increase in price only seems marginal when compared to the increase in price to the business.
They have also named the packages to play to the user's ego. Not downplaying the lower package to alienate users without budget but giving the heaviest weight behind the “just right” package by naming it Guru.
Anyone in SEO will want to think of themselves as a guru in the space. Combine this with the name for the more premium service and it again adds no significant value. The business package means nothing to the individual. It's clear what package SEM Rush is wanting you to take.
The goldilocks principle is most commonly used within the SaaS community but it has a much wider application in my opinion. There is the chance to apply this to subscription business, retail (especially in bundles) and much more.
The main aim is to make it easier for users to make decisions and reduce the cognitive load, ultimately adding more value to the user transaction.