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I have the idea that you can encourage your users to buy a specific product from a list of options if you position it as the middle-ground, sensible option.

Example: I sell widgets. Copper widgets cost $3, steel widgets cost $5, and aluminium widgets cost $10. The theory is that if I start also selling gold-plated widgets for $35, then I start selling more aluminium widgets compared to the rest because it looks like the sensible, cost effective option. And all I needed to do was start selling it next to something else that is ridiculously overpriced.

Is this effect real? Does it have a name?

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  • 24
    If you've ever gone to a nice restaurant and looked at most expensive wine on the menu, you may have wondered "who would pay that much?" The answer oftentimes is nobody - it's just there to improve sales of the second-most expensive wine on the list. May 9, 2023 at 17:04
  • 2
    Although the question is a good one, as a practical matter the copper widgets would probably cost more to make than the steel ones, so you should make them of plastic. :-)
    – Wastrel
    May 10, 2023 at 15:57

4 Answers 4

78

It's a cognitive bias called Anchoring. When people are uncertain of a product's worth, they use the information they can see to assess it - and the high-priced gold-plated widgets change that perception.

25

This could be called a decoy price, using the compromise effect:

A firm sells two types of coffeemakers: A and B. The price of coffeemaker A is $20 including a $5 margin. The price of coffeemaker B is $50 including a $25 margin.

A third coffeemaker (let’s call it D for decoy) is launched on the market by the company and a decoy pricing method is applied to this product. The price of coffeemaker D is $100 including a $60 margin. The firm is aware of the fact that they will sell barely any D coffeemakers due to this product’s high price. Nonetheless, the company’s decision to introduce coffeemaker D on the market is justified as this high-end product will boost the sales of coffeemaker B by creating a compromise effect between A and D.

(Source)

Decoy prices can also be used as a middle option. For example, instead of only offering:

  • Basic widget support for $10
  • Enterprise widget support for $40

One could offer:

  • Basic widget support for $10
  • Standard widget support for $35
  • Enterprise widget support for $40

The goal here is to draw people towards the $40 price, since it's seen as a much better value compared to Standard support.

4

Keep in mind that you shouldn't assume that it is a dark or deceptive pattern unless you have solid evidence. In general, pricing strategy is part of the company's business strategy, and price segmentation is a known tactic for operating.

So segment pricing, or price segmentation is a pricing strategy where a company will charge different prices to different segments, based on their perceived value of the product or the ability to pay for it. It does have some benefits including discount for senior citizens or students that we commonly see in many products and services.

There are different segments you can apply, the most common one being customer segments like the much discussed issue about the same product but packaged and sold at different prices for men compared to women.

Then there's the product based segment you see in many SaaS products where there are a number of tiers or packages you can choose from. The free or freemium tier is targeted towards acquiring new customers and the premium tiers are usually for customers that use the product and want more features.

Location pricing is as the name suggests, varying the pricing based on the location of the customers.

Time pricing is a pricing strategy in which prices are adjusted based on the time of day, day of the week, or other factors that create a perceived shortage in supply or urgency for the customer to take action.

There are often legitimate reasons why businesses may price their products differently, but I would only suggest that it is a dark or deceptive pattern when it is a purely profit driven and misleading pricing on the products (e.g. selling the same product with less quantity at a higher price but claiming that it is the same quantity at a lower price).

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  • 5
    the dark pattern is not the fact that different products have different prices; it's the addition of a ridiculously high price to steer customers towards a slightly less ridiculous price. Nobody will buy the gold-plated widget, and the seller knows this.
    – user253751
    May 10, 2023 at 9:51
  • @user253751 normally I would agree, but with the gap between the rich and poor seemingly increasingly all the time, it actually seems to make sense that there would be customers willing and happy to pay for something like that while still catering to those who might want the same core feature but without the additional trinkets or bells and whistles.
    – Michael Lai
    May 10, 2023 at 23:17
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    if someone does order a gold-plated widget that's just bonus money for you, but you're not expecting them to and you make more money even if they don't.
    – user253751
    May 11, 2023 at 6:43
  • What's being described in the question is not price segmentation. This answer is basically off-topic.
    – Cubic
    May 12, 2023 at 8:03
1

Three Option Strategy

Not sure if it's following the same logic as in sales but JFK's foreign policy advisers usually offered him 3 options on difficult decisions:

  • the stand off or token commitment option - inadequate on important situations but avoids political consequences of precipitate action

  • the monitoring and alert option that signals readiness for more serious actions should the situation worsen - assures right wing without significant political backlash

  • the immediate action option that signals commitment to existing policy and acceptance of political protest against it

In my time I noticed architects often offer uglier and dearer options to the one they prefer even though the latter does not match their brief.

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