Chris Koerner breaks down Go Outdoors' pricing trick: show two prices, member and non-member, with a $5 annual fee that anchors the deal. Costco charges more for membership and makes real money from it. Kohl's uses fake markdowns. The real power is psychology, not the fee itself.
All right, you're not going to believe what I found. Why is no one copying this strategy? This business is called Go Outdoors, and they're in the uk they sell outdoor products. But their pricing strategy is brilliant. It's kind of like Costco in that you can become a member and pay a yearly fee and get a discounted rate. But at Costco, you have to be a member, and it's like 150 to 200 bucks a year. But at this place, you don't have to be a member. Every price has two options. The member price and the non member price. Take, for instance, this tent right here. Non member, 250 buck member six. 70 bucks, $180 savings. So the yearly fee must be pretty expensive, right? Wrong. $5. So why are they doing this? How does this make sense? Their yearly fee could be $300, and people will go there. No, no, no. It's not about the yearly fee. Costco makes 25% of their profit from their yearly fee, and they mark everything up 14%. That's their strategy. It works great. I love Costco. These guys are different. This is called anchoring. The $5 per year is recurring revenue. Sure, it's fine, but it doesn't really add up to that much. But what it does do is it anchors someone to, A, the fact that they bought the yearly membership, and B, the higher price. You're like, might as well shop here. I might as well buy this. Wow, look at the savings. I don't want to lose money on this. It's kind of like Kohl's. They mark everything down 70%, which makes it seem like you're getting a good deal, when really their margins are like, 90%. So they're getting a great deal. The best pricing lever you can pull is human psychology. I wrote everything I know about it here.
