Why Packaging in Threes is Magically Profitable

The number three is prevalent throughout society: religion (the Holy Trinity); government (three branches of government); and even language (“the good, the bad, and the ugly”).

But why is it so prevalent? A lot has to do with the fact that the average human mind can easily store three items in short-term memory. That’s also what makes three the perfect threshold when offering choices to customers. (You’ll even notice big-name companies harnessing its power: Did you choose Apple’s iPhone in 128GB, 64GB, or 16GB? How about Amazon’s Kindle, Kindle Paperwhite, or Kindle Voyage?)

For customers, every additional choice beyond three makes it a bit more difficult to choose. As Barry Schwartz uncovered in the TED talk “The Paradox of Choice,” too many options paralyze consumers. That being said, too few options can also leave people unsatisfied. Virginia Satir, a well-known author and family therapist, once quipped: “…to have one choice is no choice, to have two choices is a dilemma, and to have three choices offers new possibilities.”

But how can your tours or activities company leverage the power of three? A common framework you can use is the Good / Better / Best model.

Here’s how it works:

Your customers choose from three packages—centered around a similar experience you’re offering—at different price points. The “best” option is packed with all the goodies and targeted to the customers who want to maximize their experience where money isn’t really an issue; the “better” option is targeted to the mainstream of your potential customers who want a good experience for a good deal; and the “good” option is targeted to the budget conscious.

Here’s why it works:

According to Dan Ariely’s book Predictably Irrational, offering three choices is important because “most people don’t know what they want unless they see it in context.” Three choices help people compare and determine which deal is best for them. In William Poundstones’ book Priceless: The Myth of Fair Market Value, he describes an entertaining beer experiment to show how a majority of customers invariably rationalize buying the middle option when presented with three choices, while a much smaller percentage will choose the cheaper and more expensive options.

Offering three choices is important because most people don’t know what they want unless they see it in context.

Offering three options also makes it easy for customers to rationalize doing business with you, and allows them to feel like they’ve done their homework when searching around for a great deal. It fulfills their need to research and cuts down on shopping the competition. This is called “competing with yourself,” because if the customer chooses any of your three options, you win.

Providing three well thought-out choices is also a means to differentiate yourself from your competitors. For example, Blazing Saddles, a San Francisco bike rental and tour company, offers three simple options under their electric bike rentals, all at different price points. The person who is simply looking for a lift in a modest price range can choose the first bike, while each additional option offers more power and features for a slightly increased price.

For an example of packaging targeted towards customers’ sophistication level, take Streets of San Francisco. Rather than simply offering one style of bike tour for all levels, it instead gives bikers a choice of three tours (at different price points, of course): Heart of the City (beginner-level), The Classic (moderate), and 7×7 (most challenging).

How to make it work for you:

If you’re offering a variety of food tours in the area, avoid cutting the number of food tours down to three. Instead, expand the options under each food tour such that each experience has three choices, or three different ways to experience that particular food tour.

For example, don’t just offer one “complete flavors wine and cheese adventure.” Instead, break it out like this (prices for demonstration purposes only):

  • Best: Experience all of the unlimited flavors including transportation for $175.
  • Better: Try only popular flavors including transportation for $140.
  • Good: Try popular flavors without transportation for $99.

This way, you’ll open up the tour to more people with different budgets and desires, and help them see what they’ll be giving up if they’re choosing to save money.

It may take some time to go through your current offerings, but using the power of three in your packages can drive powerful profits to your bottom line.