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The decoy effect is defined as the phenomenon whereby consumers change their preference between two options when presented with a third option. So, coming from this, decoy pricing is just a way of making the third option look more attractive to nudge the customers towards a more profitable option.
Most people tend to avoid the extremes and choose the middle option. To understand this better let’s take the example of a chocolate box priced at 3 different values. Now the brain will automatically eliminate the cheapest option considering it to be inferior to the rest and for the most expensive one it will start evaluating it for its worth and the add-ons, so eventually, the brain will go with the middle option.
So, the aim of the decoy pricing strategy is to guide the target audience towards a specific product by presenting an inferior choice.
4 steps for Decoy Pricing:
Things to consider when using Decoy Pricing: