The company “Graze” offers the service of delivering a box of healthy snacks to wherever you want it, each time giving a different selection of products. The box is split into four sections, in which they will place a different healthy item, depending on the consumer’s preference as indicated on their website. However, what sets Graze’s marketing strategy apart from the rest of the field, is its price structure. The offer of “one free box” is renowned when people hear the company’s name, and this provides an attractive offer for people to begin their engagement with the brand. Following this, the company provides a number of reduced price boxes, hence increasing the price slightly, but still offering the same excitement that the consumer experienced when opening their first box. Once the consumer has received a number of reduced price items, the company begins charging the full amount, and if the user does not cancel their auto-delivery account, they will continue to be charged (and will continue to receive the product).
There are two reasons why Graze’s strategy is especially persuasive, in convincing people to stay with their company. The first, simply, is that people become used to the boxes arriving; it becomes part of their schedule. Additionally, the effort for cancelling may not be deemed worth the hassle. However, the strategy is also an example of a technique known as low-balling. This term is used to describe an instance where a price is offered that does not reflect what the company intends to charge, but follows it with larger costs. This is effective as people enjoy the benefits of the service they are receiving, hence when the extra cost is presented; they change their views and accept that the price is worth paying. The underlying psychological theory behind this is that of Cognitive Dissonance; people experience discomfort through possessing two conflicting cognitions, so they change either their behaviour or cognition to retrieve the cognitive balance (Festinger, 1957).
From the literature, a study which demonstrated this effect was carried out by Cialdini, Cacioppo, Bassett, and Miller (1978). In their experiment, they asked participants to agree to participate in a study, of which 56% percent of them agreed to. After they had agreed, the researchers revealed that the experiment would commence at seven in the morning, and that they could still withdraw if they desired. However, 95% still turned up on the day of the experiment. In a second condition, people were informed straight away that the experiment would take place at 7 in the morning, and following this information only 24% wanted to participate. This shows that an initial low offer can influence agreement rates in future exchanges.
Cialdini, R. B., Cacioppo, J. T., Bassett, R., & Miller, J. A. (1978). Low-ball procedure for producing compliance: Commitment then cost. Journal of Personality and Social Psychology, 36(5), 463.
Festinger, L. (1957). A theory of cognitive dissonance. Stanford University Press.