Bite-size Case Study

The Economist: a pricing experiment

Published on June 29, 2017 Originally recorded 2010   2 min
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Decoying. Now, this can come across as perhaps one of the most gimmicky techniques, but, believe me, there's real value in here. To illustrate what decoying is, I'm going to show you an example of an experiment that was done on the Economist website. Here we have a standard subscription page with two options. You can subscribe to Economist online for $60 or for the print and the online version for $125. Perhaps as you expect only 32% of people went for both the print and the web version, but 68% went for the online and cheaper version.
The experiment was repeated but this time, with a Decoy inserted. We still have the economists online only 15 for $60 and we have the print and the web version for $125, but we now have an additional print-only subscription for $125. What effect does this Decoy have? Well, perhaps, as you'd expect, nobody's going for just the print version, but now, let's say only 16% are going to the Economist online version, but 84% have now opted for the print and the web version. There is a very important reason for why this is the case. Human beings understand value in relation to something else. What the Decoy has allowed us to do is it's more clearly allowed us to understand the value of the print and the web subscription version, which is why more people are now going for that as opposed to the Economist online.