The $7 Popcorn Trick

Last Saturday, I took my kids to the movies. At the concession stand, I was struck by the pricing structure for popcorn:

Small: $7.00 Regular: $8.75 Large: $9.25

I found myself reflexively opting for the large size. After all, it was only 50 cents more than the regular, which itself was $1.75 more than the small.

What a deal, right?

Then it hit me: I’d just fallen for the Decoy Effect.

The Decoy Effect, also known as the “attraction effect” or “asymmetric dominance effect,” is a phenomenon where consumers change their preference between two options when presented with a third option that is asymmetrically dominated.

In this case, the medium popcorn serves as the decoy. It’s priced so close to the large that it makes the large seem like a much better value, nudging customers towards the highest-priced option.

This powerful pricing strategy can be applied to various products and services. Here’s how you can leverage it:

  1. Identify Your Target Option: Decide which product or pricing tier you want to promote.
  2. Create a Decoy: Introduce an option that’s slightly inferior to your target option but priced similarly.
  3. Offer a Basic Option: Include a lower-priced option to anchor the price range.
  4. Present Choices Side-by-Side: Make it easy for customers to compare options.
  5. Highlight the Value: Emphasize the benefits of the target option compared to the decoy.

Real-world examples:

  • The Economist’s subscription model (print only vs. print + digital)
  • Apple’s storage tier pricing for iPhones and iPads
  • SaaS companies offering “Basic,” “Pro,” and “Enterprise” plans

In “I Need That,” we discuss how strategic pricing can create a sense of value that drives purchasing decisions. The Decoy Effect is a prime example of this principle in action.

Your challenge: Examine your current pricing structure. Is there an opportunity to introduce a decoy option that could guide customers towards your preferred choice? Share your thoughts below!

Remember, the goal is never to trick customers, but to help them recognize the value in your offerings and make choices that truly satisfy their needs.

Here’s to strategic pricing and satisfied customers,

Laurier

P.S. Have you ever caught yourself falling for the Decoy Effect? I’d love to hear your story! Just hit Reply to