Pricing Options and Using a Price Decoy | #salestips #skospeaker

Why It Matters

Using decoy pricing can boost revenue per sale, making it a powerful tool for businesses seeking higher margins without changing product costs.

Key Takeaways

• Two-price choices drive consumers toward the cheaper option.
• Introducing a third price creates a middle preference effect.
• A decoy price nudges buyers toward the most expensive product.
• Decoy should be priced close to the premium to appear inferior.
• Apply decoy strategy to increase average transaction value.

Summary

The video explores pricing psychology, focusing on how the number of price options and the use of a decoy influence consumer choice.

It outlines three simple rules: with two alternatives, shoppers gravitate to the cheaper; with three, they tend to pick the middle; and by inserting a decoy priced just below the premium, sellers can steer buyers toward the highest‑priced offering.

The speaker illustrates the concept with a $5, $7, $9 example, then adds an $8.50 decoy, noting that most people shift to the $9 option. He emphasizes that the decoy’s proximity to the premium makes the latter appear more attractive.

For marketers, the decoy effect provides a low‑cost tactic to lift average order value, though it must be applied transparently to avoid consumer backlash and potential regulatory scrutiny.

Original Description

Pricing Psychology 101

If you offer two options, they tend to choose the smallest to mitigate risk.

If you offer three options, they tend to choose the middle one to mitigate risk.

If you 'nudge' the middle price towards the most expensive, they'll go with the most expensive.

#skospeaker #pricing #salestip