Pricing Strategy

 The decoy effect is defined as the phenomenon whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated”. It is also referred to as the “attraction effect” or “asymmetric dominance effect”.

A decoy pricing strategy is a tactic used to boost the sales of a high profit-earning item. The marketers create another version of the product so that the consumers can compare the products economically. The new version of the product is priced just below the highest-priced product. This leads to the "decoy effect".

✱ Strategy A: Divides customers evenly between small, medium, and large boxes.
✱ Strategy B: By rising the price of the medium box, makes the most expensive box look like the better deal, that way the customers spend more money.

In an attempt to reduce this anxiety, consumers tend to simplify the process by selecting only a couple of criteria (say price and quantity) to determine the best value for money. Through manipulating these key choice attributes, a decoy steers you in a particular direction while giving you the feeling you are making a rational, informed choice.