Ask Me Anything Question
We emphasize our entry-level price of $29 tickets because focus groups have shown that people think they can't afford to attend our theatre. Is there a name for this kind of starting-at-the-bottom, low-price marketing? The opposite of ‘decoy pricing’ essentially? And does your research indicate it is a good idea?
Steven Roth’s Answer
Decoy pricing is defined as “a tactic of publishing or displaying a high price so a customer will feel more comfortable with a mid-range price.” There really isn’t a term for the opposite of decoy pricing. However, your question does apply to two other pricing terms: anchor pricing and the primacy effect:
- Anchor pricing is setting a price that patrons can usually expect and accept to pay each time.
- The primary effect is when people are most influenced by the first information they receive. If you list prices from highest to lowest, the patron will pay attention to those first, and may set a higher price as their acceptable anchor. If you list prices from lowest to highest, they may accept a lower price as their anchor. In your case, “starting at $29” sets a low anchor and makes the low prices the ones the patrons will consider first.
The “prices start at $29” does signal that the performance is affordable. However, this strategy may backfire in a number of ways:
- You only have limited inventory available at those lowest prices.
- Those seats are only available for certain performances (weekdays) or audiences (students, seniors, military).
- The experience from those seats is problematic due to sight line issues, limited leg room, etc.
- The patron who can afford to pay the highest prices may not do so because 1) the first price they heard was very low and 2) it set a lower anchor than the patron was expecting.
It’s important that you put that lowest price, whatever it is, in context. For example: A pricing scale of $100, $80, $65, $50, $29 could send the message that the $29 seat is too cheap, and there may be something “wrong” with it. On the other hand, a pricing scale of $100, $80, $60, $40, $29 gives the message that even though prices may start at $29, there’s still an option to trade up to a “better” seat without breaking the bank.