what is decoy pricing?

Decoy pricing is a very clever way to make a different product offering more attractive by offering an inferior or decoy price. The term 'decoy pricing' was widely written about by Dan Ariely after he discovered Decoy pricing being used by the Economist magazine. He consequently undertook research which proved that Decoy pricing worked.

Here's an example of Decoy Pricing being used:

Online learning courses: $65
Printed learning materials: $130
Online access and printed learning materials: $130

In this example, the printed learning materials (middle option) is the decoy price. It makes no sense when you can have online access as well for the same price. Without this decoy price, there are two options and most people are likely to order the online learning courses but when the decoy price is introduced there is a significant shift and more people buy the Online access and printed learning materials instead. The decoy pricing acts to move the human mind away from comparing the lower priced option and instead to compare the two options at $130 - therefore deciding to purchase the last option with access to both printed and online learning materials.

---