Decoy pricing is a strategy in which a third, less attractive option is introduced to influence customers toward choosing a higher-priced or preferred option. This psychological pricing tactic works by presenting a “decoy” product that makes a specific choice, often the middle or higher-end option in a set, appear more appealing. For example, if a company offers small, medium, and large sizes, the medium size might be priced close to the large size, making the large seem like the better value.
Decoy pricing is effective because it leverages the power of comparison, helping customers justify spending more by framing the higher-priced item as a better deal. This strategy is commonly used in retail, food service, and subscription plans. For decoy pricing to be effective, the decoy option must be similar enough in price or features to the target option to create a meaningful comparison. If implemented poorly, customers may perceive the tactic as manipulative, potentially damaging trust. Effective decoy pricing subtly influences customer decisions without creating a sense of pressure.