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Start free trial →Decoy pricing is a pricing strategy where a third option — the "decoy" — is introduced specifically to make another option look more attractive by comparison. The decoy is deliberately priced or configured to be inferior in value, nudging customers toward the option you actually want them to choose. It works by exploiting the "asymmetric dominance effect": when one option is clearly better than another across at least one dimension, customers gravitate toward it without needing to think hard about the absolute value.
The classic setup uses three options:
Option B is the decoy. Its price-to-quantity ratio is worse than both A and C. Customers comparing B and C quickly see that C is the obvious smart choice — getting twice the quantity for just ₹50 more than B. Without the decoy, many customers would have chosen Option A. With the decoy, Option C becomes the default choice.
Decoy pricing is particularly effective for D2C brands selling in multiple sizes, subscription tiers, or product bundles. It nudges customers toward your highest-margin or highest-LTV option without requiring discounts or heavy persuasion. Because the choice architecture does the work, it scales effortlessly — once the pricing tiers are set, every visitor is guided through the same comparison without any manual effort. A modest shift from the small SKU to the large SKU can increase average order value by 30-50% at the same conversion rate.
Boat, the audio accessories brand, applies this logic across its headphone tiers. A ₹1,299 pair with basic features is compared to a ₹1,999 pair with marginal upgrades (the decoy) and a ₹2,199 pair with significantly better specs and features. The jump from ₹1,999 to ₹2,199 feels small; the value gap feels large. Customers land on the ₹2,199 option as the "smart buy" — which is exactly where Boat's margin is strongest.
Test whether adding a decoy option changes the distribution of purchases across tiers. Your control might have two options; the variant adds the decoy. Measure not just which option customers choose, but overall revenue per visitor — a decoy that shifts volume to higher-margin SKUs should increase RPV even if conversion rate stays flat.
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