By Victor Antonio

In the field of influence, I’ve lately been fascinated with how people make buying decisions and how easily it is to manipulate a person’s choice without them being aware of it.
There have been many studies done that demonstrate how having multiple options forces a buyer to make a decision based on the context of the pricing presentation.  Let me illustrate my point with a simple example:

If one chair is priced at $50, the other is priced at $60 and they seem to be of equal quality, the average buyer would most likely chose the lower priced chair.  
Now, if I added a third chair of equal quality into the pricing mix at say $75, which would you as a consumer choose?  If you’re like most people, you'll probably go for the $60 chair.  

Your line of reasoning might go something this, “I don’t know which one’s better, so I’ll choose the one in the middle just to be safe.”   The moderating factor here is your lack of knowledge as to which one is better.  Now, if all three chairs were identical, from the same manufacturer and the same material, then any sane person would choose the lowest price item.  But, because we aren’t sure, we go for the safest choice (i.e., we don’t want to underpay or overpay for an item).

Let’s run some numbers.

If in year one I offered two options (e.g., $50 and $60) and sold 100 and 30, respectively, I would have the following:

Chair 1     $50        100 units    $5,000
Chair 2     $60          30 units    $1,800

Total Revenues: $6,800

Now, let’s say that in the second year I decided to add third option at $75 and still sold the same number of chairs (130):

Chair 1     $50        30 units    $1,500
Chair 2     $60        80 units    $4,800
Chair 3     $75        20 units    $1,500

Total Revenues: $7,800

By simply adding a third option, I increased my sales from the previous year by $1,000 (or ~10%).  Knowing the above, some manufacturers ‘manufacture’ a third option intentionally because they know it will have the tendency to increase their sales as I’ve shown above.  This third option is often referred to as a price decoy because the manufacturer knows that the decoy's role is not to sell a lot of units, but to push up the sales of the lower priced unit.

Ha!  I bet you're going to watch out for this in the future when making a pricing decision :-)

 Sales Influence Tip: Keep this in mind that when presenting two options to a client, although slightly different, the client will tend to go for the lowest price item just to be safe.  Therefore, if you want to get the client to move up on his price point, you may want to add a third option in order to coax the client into choosing the middle-of-the-road option.