What's Decoy Pricing & Why Businesses Need It?

Posted by Philip Huthwaite on June 6, 2023

What is Decoy Pricing?

Decoy pricing is a clever strategy that guides potential customers towards a specific product by presenting an inferior alternative. This approach is achieved by creating an additional version of the product solely to make the higher-priced options appear more economically favorable. By compelling individuals to compare pricing options, the decoy effect comes into play, resulting in increased sales of the more attractive, higher-priced item.

Have you ever noticed how frequently products are offered in three different options? While part of it may be attributed to businesses wanting to provide varied choices to customers, astute marketing takes advantage of the decoy effect to steer customers towards the priciest purchase, rather than the one they might typically choose. Our brains tend to disregard the cheapest option, regardless of its suitability for our needs, as it seems inferior in comparison to the rest. This psychological bias is skillfully utilised by companies to influence consumer behavior and maximise sales.

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Topics: Pricing Strategy, Decoy

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