In today’s book of the day I am going to share pricing strategy that adds over 5 CR in my clients Pocket
The Decoy Effect—an interesting, and somewhat controversial, marketing phenomenon caused by your introduction of a less favorable option (higher price, fewer features, lower quality, etc.) that makes your more expensive option more attractive.
A classic test conducted by The Economist magazine—a British publication founded in 1843—presented three subscription options on their website:
1. Web Only Subscription: $59.00
2. Print Only Subscription: $125.00
3. Print & Web Subscription: $125.00
Huh? Why the heck would The Economist sell the combo Print & Web subscription for the same price as just Print?
Psychology Professor Dan Ariely at Duke University wanted to find out.
He conducted two tests.
In Test 1, he made the same three offers to his students: the three subscription choices listed above:
Test 1 Results: Sixteen percent of buyers chose Web Only, none chose Print Only, and 84 percent chose the Print & Web combo.
Test 2: Next, to see what effect the distractor option (Print Only) had, Ariely removed it from the choices, offering only the Web Only and Print & Web options.
Test 2 Results: Sixty-eight percent picked the Web Only option, and 32 percent chose the Print & Web option.
Bottom line: Adding the distractor helped increase subscriptions of the more expensive option by 52 percent. That’s because it made no sense to get a Print Only subscription
Subscription for $125 when you could get the Print & Online combo for the same price.
When the distractor was removed, buyers went more toward the cheaper option.
My First Business Consulting Client |
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My father owns a shop, where he sells lots of stuff useful in house. When i was around 18, I read about this strategy for the first time, at that time my father used to sell Rope, he had 3 options where he used to charge Rs10 for 1 meter, Rs20 for 2 meter, and Rs30 for 3 meter.
90 X 10=900 252 X 20=5040 30 X 8=240 so Total was Rs6180
Then I decided to try what I learn, my father was against but somehow agreed to let me try.
I changed the price from Rs10 for 1m, Rs25 for 2m, and Rs30 for 3m
and result
83 X 10 = 830 5 X 25 = 125 287 X 30 = 8,610
Total was Rs9565, I am able to Raise 50% revenue with this simple change, |
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I have a Question for you
What additional options can you add to cause the Decoy Effect?
Can you create a new product?
Bundle products together?
Supposedly the magazine increased its sales by 43% after this pricing strategy. The Economist made more in subscriptions by simply adding one simple line to their order page |
