How To Present A Menu Of Bank Prices

Bank Research

Three social scientists, Suk, Lee, and Lichtenstein, walk into a bar… No joke, they do, and they observe patrons for eight weeks and watch how they order off specially designed beer menus. One beer menu has a variety of beers ordered with prices from high to low. The other beer menu has a menu of beers ordered with prices from low to high. Are the results the same? How does it compare to a randomly ordered menu? Does it really matter? And, most importantly, what happens if you did the same test for banking?


The Results


The results of the above-mentioned joint study from The University of Colorado and Korea University done in 2012, test something called “reference dependence theory” and look at the influence of price order on choices across differing brands. What the study found out was that it does matter how brands and prices are ordered.  If you ordered choices on the menu from high to low, the bar owner made an additional $0.24 per beer as patrons ordered more expensive beers compared to a random menu or a menu ordered from low to high.


Does This Theory Work For Banking?


In order to test this theory for CenterState, we walked into a bar and conducted a very similar experiment with our retail checking account offerings. We presented a representative sample of approximately 200 patrons with our checking account options and asked them to choose one that would best suit their needs.


Side Research Note: At this point, we will grant you that there was no need for us to go into a bar to conduct this research, but the parallel and opportunity for expensed drinks was just too much to pass up. Besides, it was St. Patrick’s Day and you have to go to where the people are (research team below). We did our best to ensure everyone was sober when taking this test, but in the name of full disclosure, it is not like we breathalyzed anyone as that would have been awkward. We will finally add that we also hope our CEO (and CFO) are too busy to read today’s post. But, we digress.


Bank Product Research



Getting back to banking – Most every bank in America that displays pricing for checking accounts, including CenterState, orders their checking account from cheapest to most expensive. We either showed patrons: A) the exact page as presented on our website in low to high order (graphic below); B) The identical format of accounts but in random order; or, C) The accounts in reverse order with the highest priced checking option first. 


Menu of Bank Prices


Our first lesson was that having some order to the prices turns out to be important.  If you order your accounts in seemingly random sequence, people are not only slower to make decisions (we timed the response rate) when compared to the other two options but a material portion (9%), choose to skip it even when asked to make a decision. Luckily, no bank in the industry does this, so this point is moot.


Our Findings


What we found is not only do we actually like Guinness, but account ordering matters much more than beer ordering. More importantly, our findings were the opposite of what Messrs. Suk, Lee and Lichtenstein found.


When choosing beer, from a behavioral economics standpoint, the first set of prices serves as an anchor or reference point so that the other prices are compared to the first set. When ordered from low-to-high, participants perceive a loss in price with each new choice costing more. They essentially stop higher on the list, which correlated to a choice with a lower relative price in comparison to a high-to-low order.  When looking at a beer list that is ordered high-to-low, there is a perceived loss of quality as opposed to price. Participants stop a little lower on the list, but that stopping point, depending on demographic, occurs at a higher price point.


It turns out that beer is not the same as banking. When we ordered accounts from high-to-low, participants chose the cheaper options more often. With this order, our average revenue was $7.97 per month per customer. However, when we ordered the checking accounts from low-to-high, our average revenue shot up to $10.51, or a gain of $2.54 per account. That is a material 24% difference. 


Impact on Checking Account When Ordering Sequence


What’s Going On


While we are not psychologists (contrary to what we were saying at the end of the night after a series of Guinness), our thesis is that the more complicated nature of account choosing forced participants in exactly the opposite direction as choosing a beer. When ordered from low-to-high, the time it took to make a decision was 15% longer as participants studied account attributes and based their decision on the quality of the product. When ordered from high-to-low, participants focused more on price and slid down the list at a faster rate rendering the quickest decisions of any of our three presentations.


Conclusion and Next Up


Our findings and conclusion validate the methodology of how most every bank is already presenting their checking products and that low-to-high price sequencing is superior compared to high-to-low. Contrary to what we might have implied, we did conduct this study with some rigor, and the demographics of our participants can be found HERE.


Yesterday’s post regarding displaying a price was one important finding that came out as a byproduct in conducting this research (HERE).   In the coming days and weeks, we will be presenting our findings on what our focus group participant’s thought about our pricing in general, about banking and about the better way to display product information.  Some of the things that we will be gathering data on and researching are if the size of your font matters when it comes to price, should pricing be displayed first or last if products should be aligned vertically instead of horizontally, and others. We have a long list of items to test, the results of which should make banks more effective.


Stay tuned and if you are interested in similar research for your bank, just let us know where to send the bar tab.