A little secret about prices

By Isma Ruiz on
April 28, 2019

How do businesses set prices to influence buyers? How do businesses increase their revenue by setting their price strategically?

Dan Ariely gives several examples on how prices are strategically placed by companies to influence client decisions.
I would like to give you an example of a technique based on a set of 3 different price options for 3 different product variations.

Imagine an online clothing shop is advertising the above special promotion. Draw your attention to the fact that “Jeans+Jacket” has the same price as “jacket” on its own. Why?

We as human beings don’t know what we want and we choose by context and by comparing similar products. The client will think that “Jeans + Jacket” is a bargain but in fact it has been strategically thought out to persuade the user to choose “Jeans and Jacket” instead of purchasing the jacket on its own.

By designing this pricing table the management of the shop knows that there is a high chance that nobody will buy the Jacket on its own. In fact this is a “fake option” created to persuade the client decision into buying “Jeans and Jacket” instead of Jeans.

The third option, the “Jacket” is called “decoy” and its only purpose is to motivate the user to buy the second product instead of the first one. We as consumers make decisions by comparing items that share similar attributes.

Now imagine a restaurant menu. The restaurant offers 2 different types of white wine. The first one, wine A, costs 15€/bottle, the second, wine B, is more expensive at 24€/bottle. In this situation if the restaurant management wants to push the client to buy the most expensive wine, wine B, a way to do it would be by adding a third option, wine C, at 50€/bottle, much more expensive but really similar to wine B. This is the ‘decoy’ and it would be placed strategically to boost the sales of wine B.

We always make decisions by comparing products in relation to other products. But not just products, also services, experiences, trips, jobs, etc. We need context to make decisions.

Sometimes as customers we wrongly think that we are responsible for our actions, but this is not really true. Many of our decisions are irrational, Predictably Irrational.

I got all this knowledge from an amazing book I highly recommend Predictably Irrational by Dan Ariely. [Full Disclosure: As an affiliate, I receive compensation if you purchase through this link.]

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