The Decoy Pricing

 *The Unusual Sunday Drop!* #006

_a weekly WA Series_

Let’s study and analyze closely how decoy pricing operates through this case study:

Steve is a retired Navy Officer. He has a stall, where he sells watermelon juice at Miami beach, Florida. He offers 3 sizes of juice Glasses. Price of each, unit is as per below:

Small- 100 ml- $ 2.5

Medium- 200 ml- $ 6.5

Large- 400 ml- $ 7.5

It was seen that the sale of the large cup was high followed by the small cup and there were very few customers who used to opt for the medium one. Steve thought, that there is no use of offering a medium glass as no one is willing to buy. He removed it kept only 2 options- Small- 100 ml- $ 2.5 and Large- 400 ml- $ 7.5

Guess what? nobody purchased a large glass. There was a remarkable shift to the purchase of small glass of juice.

Let’s take a deep dive, what did Steve learn in this product listings. When he started selling Small glass of juice 100 ml for $ 2.5 & Large- 400 ml for $ 7.5 his customers thought that the large one is way too high priced, so they only purchased the small one.

However, in the previous case when Steve was offering 3 options- Small 100 ml for $ 2.5, Medium 200 ml for $ 6.5 and Large 400 ml for $ 7.5, customers thought why to buying Medium 200 ml for $ 6.5, if we are getting 400 ml (Double) just by paying $ 1.5 more. Thus, they opted for the Large one because price seems to be cheaper with double quantity as compared to medium one.

Steve listed the medium glass again in the category, because medium glass helps customers to take decision of buying the large one that's the only role of the medium size of watermelon juice.

Note- In an open market usually we see that the large size products are listed at way higher and offered discount which is almost slightly high than the mid one offered to the customers. This directs customers to buy the top notch or the premium one and companies with the luxury brands also follow the same pattern to drive their revenue.

Moral: Decoy priced product looks justified as compared to other listed products.