Why does every successful company have three pricing tiers? It isn’t for variety; it’s for direction.
Most use it as two options seem too few to your average prospect. But four or more is overwhelming, so three is the magic number.
This is commonly used in subscription services and SaaS, but once you see it, you can't unsee it.
Unlike us, we're transparent and fair, offering packages that suit our clients' needs; others use psychology to lead potential customers to their preferred option.
This isn't exactly unethical. It does slightly increase cognitive load and could harm the brand if your reader happens to be savvy about these things.
What's the Decoy Effect?
It occurs when consumers change their preference between two options when presented with a third option that is asymmetrically dominated.
This is how it works:
- Option A (target): £500 a month is a full feature set.
- Option B (competitor): £200 a month gives you basic features.
- Option C (Decoy Effect): £450 a month is missing 50% of the features of Option A.
Option C is objectively bad compared to Option A.
So, by creating a decoy product, you've made the £500 option look like an incredible bargain.
Which, of course, it is, as it makes your customer's life a lot easier and better; it's just people need a little helping hand in making that leap sometimes.
How to apply this to your pricing page
- Identify your target: Which service do you actually want to sell?
- Architect the "Decoy": Create a version of that service that's only slightly cheaper but significantly less effective.
- Visual saliency: Highlight the target option with a "Most Popular" badge. This triggers social norming, telling the brain that this is the safe choice.
A word of caution, this technique isn't to rip people off or mislead them into buying something they don't want.
That tactic ends up costing businesses more, either through legal claims or through a customer service resolution process, and ultimately brand integrity.
