by Usman SheikhThe Decoy Effect Pricing Strategy: How Smart Pricing Can Boost Your Sales
The Decoy Effect Pricing Strategy
Today, we’re diving into a fascinating psychological trick that could revolutionize your pricing strategy: the Decoy Effect.
The Decoy Effect is a fascinating concept in consumer psychology that was first discovered in the 1980s.
This clever marketing trick helps businesses boost their sales by influencing how people make choices.
Researchers have found that the Decoy Effect works in many different situations, not just when we’re buying things.
It can even affect how people vote in elections or choose medical treatments.
For example, a study published in the Journal of Consumer Psychology showed how voters’ preferences can change based on the presence of a less appealing candidate.
Companies often use this trick in their pricing strategies. Understanding the Decoy Effect can help you make smarter choices as a consumer.
Ever wonder why some pricing options just seem to make sense, even when they shouldn’t? That’s the Decoy Effect in action, and it’s a game-changer for the bottom line.
Let’s break it down with a simple example:
Imagine you’re selling two products:
– Small size: $1
– Large size: $3
Pretty straightforward, right? But here’s where it gets interesting. Let’s introduce a medium size. Logic might suggest pricing it at $2, but that’s not how the Decoy Effect works.
Instead, we price the medium at $2.80.
Seems counterintuitive, doesn’t it? But here’s the magic:
1. Price-conscious shoppers see the $1 option as a good deal.
2. Value seekers (that’s most of us) suddenly see the $3 large size as the best bang for their buck.
The medium size isn’t there to be bought – it’s there to make the large size look irresistible!
This isn’t just theory – it’s a proven strategy used by big players.
Take The Economist, for example. They’ve been using this trick for years to upsell subscribers to their premium offerings. (I went and took a look at their more recent pricing – and surprise – it is not no longer there)
No matter. Starbucks does it well with their drink sizes as shown below:
So, how can you apply this to your business?
1. Identify your hero product (the one you really want to sell).
2. Create a slightly less attractive option at a similar price point.
3. Watch as your customers flock to your intended choice!
Remember, pricing isn’t just about numbers – it’s about psychology. Use the Decoy Effect wisely, and you could see a significant boost in your average order value.
Want to learn more marketing psychology hacks? Watch this 1 min video that gives more examples and a video walk-through:
Want to keep learning about how our brains work -then check out my blog on How Our Brains Work!
Ready to take your pricing strategy to the next level? Let’s chat! Book a free consultation with our team and let’s unlock your business’s full potential.
Until next time, keep experimenting with your pricing, and watch those sales soar!
Need help with your marketing? Branding? Strategy? Call us at 437-562-1316 or simply contact us
From a start-up helping local small businesses, over a span of 5 years, Usman has built Web Worx Labs to be a leading provider of digital marketing solutions that employs 15+ full-time employees and has customers in over 30 countries.
Outside of work and his passion for all things digital, Usman is a proud father of three, loves running and is an avid reader.
Follow Usman on LinkedIn or Twitter as he is always sharing tips on strategy, branding, marketing and analytics.