Goldilocks Pricing

The concept of Goldilocks Pricing is nothing new and originates from the story of Goldilocks and the three bears. The first bowl of porridge was too cold, the second bowl of porridge was too hot, but the third bowl of porridge was just right and this is the bowl that Goldilocks decided to eat. 

This model can be applied to the way products and information relating to these products is presented to consumers. Choice is a good thing, but consumers require enough information to be able to make their own decision as to which offering represents the best value for money to suit their requirements. Providing more than three options begins to cloud judgment and stifle the decision making process. If you go into a supermarket to buy some baked beans and 100 varieties are offered at multiple price points, it is likely that you will end up leaving confused and without purchasing any beans at all!

The cycling industry shows evidence of things that work well, yet I believe that some ranges can be synthesized further. Reducing the number of product lines benefits the consumer, retailer and supplier and it should be in that order of importance too. There is a cycle to the benefit of simplifying the number of choices but broadly speaking;

• Consumers benefit by having clearer and more simplified thought into which product suits them best.

• Retailers benefit from reduced shop floor uptake that should hopefully be used to support a simplified decision making process – not to add more stuff!

• Other benefits to the retailer include restocking and inventory requirements revolve around a smaller number of products over a higher volume that should in turn lead to supplier discounts.

• Suppliers can focus their demand planning around fewer products and negotiate smaller manufacturing costs across higher volumes of the same product and this can hopefully be passed onto retailers through increased margins or by investing into higher quality product for the same cost.

Two examples show how Goldilocks pricing has been and has not been observed from the perspective of the consumer.

The Allez range of Specialized bicycles offered in the UK observes the Goldilocks principle to a tee. Three bicycles are offered at price points of £550, £725 and £900. Model names also support this idea, with the entry model simply called Allez, the mid price point being the Allez Sport and the top tier model the Allez Elite. In my belief, there should be an incentive to jump a price tier and offering colour options in the base tier removes one less incentive to make the leap to the mid level model.

Goldilocks operates to make the middle option a more attractive proposition, determined by the consumer. The addition of colour options below this mid price point only removes an incentive to make the leap to the mid tier, especially given that lower price point consumer may be perhaps more influenced or drawn in by colour options. However to make this a fair argument, it would be wise to consider how each model fits within the market compared with other brands, perhaps only offering one colour option would make this lower tier model the lowest tier of three equivalently priced alternatively branded models. 

Considering an example where this time the number of options exceeds Goldilocks principles is observed in the road fingerless glove offering by Specialized. Six different models are offered, ranging in price from £17 - £30. 

From the perspective of the consumer, more choice means more effort needs to be put into making a decision and to establish the mid range price point. By average, this mid range price point is £24.67, which does not match with the offerings at £23 and £27. In my view, this forces another level of decision-making and tends towards the lower mid price point of £23. Still though, this is a step up from the base model at £17 but perhaps a glove that meets this mid price point would be a simple option for people to buy without much thought.

One last point to mention on this example is the naming of the models and how this correlates to other Specialized products including bicycle and clothing.  The Allez bicycle range features a sport model at the mid level price point and it is only natural for consumers of this bike to associate the sport model glove with this bike, yet in actual fact the sport glove is the lowest price model.