The Principals of Price Comparison and Offering Strategic Decoys

Much of the following from Dan Ariely’s fantastic book, “Predictably Irrational.”

Knowing how people price shop—especially when it comes to relatively expensive items like high performance technology—is a significant sales advantage. Following are a few proven principals of comparison.

• Where possible, always offer comparison products and services, but be strategic about what you compare.

• People tend to choose the second best option – i.e. if there are three laptops for sale they’ll choose the second most expensive one. So, in many cases, the most expensive item is just a decoy.

• While we tend to compare things that are easily comparable, we also avoid comparing things that are not easily comparable. For example, you’re shopping for a house in a new town. The Realtor shows you three homes. One is contemporary and the other two are colonials. The colonials are very similar, but one has a bad roof. People will choose the colonial with the good roof, because they have something to compare it with.

• The colonial with the bad roof is, in essence, a decoy to lead the buyer to the colonial with the good roof. You can create a decoy like this with almost everything. The strategy is to offer one item alongside something very similar but inferior in some way.

• Iteration: If you have a high priced item that isn’t selling, offer a similar, but less expensive version alongside it. The high-priced version will sell the lower-priced version because now consumers have a comparison.

The bottom line is that what consumers are willing to pay is fluid: people don’t know what they want unless they see it in context.