Learn how to use decoy pricing to increase sales by adding a reference point to your pricing plan.
Decoy pricing is a growth marketing tactic that uses irrational behavior to increase sales. It was first introduced by Dan Ariely in his book Predictably Irrational. Ariely conducted a study on the Economist’s pricing plan to illustrate his theory. Economist.com had two subscription options: a web only version for $59 and a print + web version for $125. When presented with all three options, 68% bought the web only version and only 32% bought the print + web version. Then Ariely added a new reference point, “Print only” for the same price as “Print + Web”. When presented with all three options, 16% bought the web only version while 84% bought the print + web subscription. The print + web sales increased by a significant 262%! Decoy pricing is a great way to increase sales by adding a reference point to your pricing plan. It works by creating an illusion of value and making the desired option look more attractive. By adding a decoy plan to your pricing, customers are no longer comparing the cheaper option with the more expensive one. Instead, they are weighing the decoy plan against the desired option. This makes the desired option look more attractive and increases the chances of customers buying it.
