Decoy effect explained

By | March 14, 2017

Decoy effect is a marketing strategy that can help increase sale revenue by adding a “noise” option between a fair and high prices option. Below is an example of decoy effect.

One popcorn stand is offering 2 options, small cup for $3 and large cup for $7. The vast majority of customers pickup small cup (for $3) since they all think $7 is a quite much with a popcorn. When this stand adding a “noise” price option of $6.5 for the medium size of the cup, the mainstream come to the large cup option for $7. They think with only 50 cent in different (between $6.50 and $70) so large cup should be a big deal. Just by following the rule of decoy effect, the popcorn stand increase a huge revenue, nice work.

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