What Is Decoy Pricing?
Decoy pricing, which is also called “asymmetric dominance,” is a way for companies to use price to sway customers’ decisions and push them towards a certain option.
It means adding a third, less appealing product or price level on top of the first two. The purpose of this third choice called the “decoy,” is to make one of the first choices more appealing to customers.
Businesses can change how people think about value by using bait to get people to choose the choice that the brand wants. This price approach is based on the idea that people make decisions more easily when they have a lot of options.
What Does Decoy Pricing Do?
Cognitive bias and decision-making psychology are at the heart of decoy pricing. When people have several choices, they usually compare and judge them based on how valuable they think each one is. This is where the fake animal comes in handy. By placing the fake in a certain way, one of the other choices will seem more appealing. One psychological effect that helps fake prices work is called the “compromise effect.”
When people have a choice between two or more options, the compromise effect says they are more likely to pick the central option if there is a third option that is meant to be less appealing. This is because the decoy makes the medium choice look like a good way to get somewhere between the two extremes.
Pros and Cons of Pricing Decoys
One of the most debated strategies is decoy pricing. On the one hand, it pushes people to buy certain items, but on the other hand, it’s not always clear what the good effects are. The main pros and cons of this approach are listed below.
Pros
It makes people notice and want to know more about your goods. Customers have enough options when there are three things on a shelf, and they are likely to look around and see what else you have. Once you have people visiting your online shop, all you have to do to make sales is highlight the product’s benefits.
It might speed up the process of making a choice. A fake item helps customers tell the difference between two or more goods so they can choose the one that best fits their needs and budget.
It increases profits and boosts sales. With more sales and better rates, you can get people to buy from your brand when you know how to attract them. Also, adding useless choices to goods that are already more expensive lets the seller raise average checks and margin profit.
By using decoy prices to steer customers towards certain choices, businesses can increase the chances of getting what they want. Businesses can get people more interested by giving them a way to compare things and making the options they want to look better value for money.
Having a fake around makes it easier for people to decide what to buy. This can make it easier to make a choice and make it more likely that the item will be bought. Putting a more expensive option next to a cheaper one makes it more likely that people will choose the more expensive option.
Cons
No promise of success. To use fake prices effectively, you need to have a deep understanding of your ideal customers and how they normally shop. The results of this strategy depend on a lot of things, like how you place your brand, the features and quality of your goods, the people you’re trying to reach, and so on.
If you use this approach too much, it could hurt your brand’s image and how valuable customers think it is. On top of that, fake goods might not be wanted at all.
When customers learn about the fake approach, they might feel like they were tricked, which can make them less likely to trust the business.
If it’s not done right, a fake could confuse customers and make them not want to make a choice.
Decoy Pricing: How to Make It Work for Your Business
With this approach, you need to add a fake item to your collection slowly and steadily in order to get the most out of it.
Pick out the item you want to sell. A lot of the time, businesses choose goods based on what users want. But you can also use a fake approach to boost sales of things that aren’t very popular, like big cups of coffee.
Build the thing. Make sure that the item has more benefits than the other items in your queue so that the fake strategy works and the item sells well. You should also have a good reason to charge more by adding more benefits and features.
Make a fake. There should be a way to add this choice that doesn’t take people away from the main product. The goal item should be more valuable than the fake item, which makes it more likely that the audience will choose it.
Include at least three choices. For customers to be able to make a comparison, this is the most important rule of the fake approach. However, don’t give them too many options—no more than five should be given.
Figure out how much the fake is worth. Costs should be very close to those of the target item. Decoys are usually a little cheaper than the target item but have less value (enough to make buyers want to choose the better choice).
Pay attention to the price of decoys. Once the plan is in place, it needs to be evaluated to see how well it works. Get information about sales and how customers act. Once you know what you found, you can change your strategy.
If you run a store that sells more than one brand and the makers don’t give you choices that can be used as a decoy, you can still show your goods in a way that makes them look like they are decoys. Usually, this happens with tools or clothes.
The last thing you should do is keep an eye on the market. Use tools from Priceva to keep an eye on prices and find the best ones. They can help you keep your prices low and can change them as often as you need to in order to stay competitive. You don’t have to analyze by hand; these price intelligence tools will do it automatically and give you information you can use.
Conclusion
Price tricks that change how people act can help businesses a lot if they want to make more sales and influence what customers buy. People use cognitive mistakes and the way people make decisions to guide customers toward the options they want. This is also known as fake pricing.
Adding a third, less appealing choice between the first two can make one of the first two choices more appealing to customers. This time, the decoy’s form makes the chosen choice look better, which leads people to choose it. The name for this is the deal effect. You should use price decoys for a number of good reasons. It makes products stand out, which not only gets their attention and makes them want to look into other goods but also helps them decide faster. Businesses can also steer customers towards higher-margin items, which can help them make more sales and more money.
As part of a business plan, you need to pick the goods you sell with care, set your prices, keep an eye on things, and make changes as needed. By following a plan and using tools like price intelligence software, businesses can use pricing decoys to change customers’ behavior for the better and boost sales. Visit Rubick.ai for cutting-edge solutions.
