Have you ever thought of pricing beyond cost + margin?
Did you ever notice the way you make decisions by available choices?
Did you ever feel curious when a book judged by its compelling cover became a boring read?
Have you ever thought why a shirt is priced at 2999 instead of 3000?
Most of the times we make irrational iterations to justify the rationality of our decisions. Psychology plays a mindboggling part in pricing and many times we fall into the trap of it and end up buying more, expensive or even useless.
Psychological pricing has many forms, and you may come across many such types of things around your local retailers or grocery shops. Just like I bought apples on a relatively high price because of a sticker depicting “High Quality,” only to find them rotten inside. Damn smart street vendors!
The decoy effect is definitely not the only cognitive bias that is apparent in humans.
To understand The Decoy Effect, let’s start with an example:
The Economist is widely known for using The Decoy Effect. Out of the below-mentioned choices, try to choose one out of three offers:
Many of us will argue that the offer I (left) is the best option. It is cheap to have both the subscription for US$15, which are worth of US$24 (US$12 each). You will suddenly feel that you are making a rational choice with a right amount of deal. Other options seem irrelevant, and you are ended up spending more even if you do not need one or other kind of subscription.
Let’s take another example: The bottle with $30 tag suddenly becomes reasonable after the introduction of $50 tag bottle.