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Decoy Pricing & Anchor Pricing Explained

11/8/2014

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Some new content was added to the pricing resources section of the Beyond Cost Plus site that covers two very important pricing concepts:

Anchor Pricing
The idea here is that introducing an anchor price early on can make subsequent prices look much better in comparison. Think about the price tag you see on a sale item. The larger undercounted price is almost always prominently displayed because it acts as an actor that makes the smaller discounted price seem much more attractive.

The new content includes both a definitions and some real world example of anchor prices are used to establish value.

Decoy Pricing
The concept of decoy pricing draws on the asymmetric dominance effect – the idea is that if one option completely dominates another it becomes much more attractive. Decoy prices are introduced to do just that – be completely inferior to another specific option in all possible aspects – making that option much more attractive to the consumer (and steering them towards the option that the vendor had in mind).

Decoy prices were covered beautifully in the bool Predictably Irrational by Dan Ariely. The new content includes his famous example (from The Economist magazine) as well as a few others. One looks at subscription plans for the New York Post while another looks at how decoy pricing was used on an Indiegogo campaign.


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    Mark Anderson is a software developer, small business owner and pricing enthusiast.

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