I’ve always been intrigued with how the brain works, especially when considering the psychology behind decision-making. Whether it’s using psychology to push an agenda, persuade people or utilized to sell, it’s fascinating.

Arizona State Professor of Psychology and Marketing, Dr. Robert Cialdini, wrote the book Influence: The Psychology Of Persuasion and it truly opened my eyes. I credit his book with revolutionizing how I sold cars and taking me from a truthfully awful salesman to one of the top guys on the floor.

I’ve always had a desire to learn and test my own theories and hypotheses. My newest obsession is with the psychology of pricing and using human nature to guide customers to the package a dealer wants them to choose.

For a lot of businesses, and this is especially true for auto dealers, the amount of choice a customer has can be crippling. Sure, they know the type of car they want, but which model? Which trim? How many options can be added? Is there a better deal somewhere else? Paralyzing decisions.

You know which package you hope they decide to buy; now it’s just a matter of letting them think they are choosing it themselves.

Let’s dive into this a little more. First, this TED talk from Dan Ariely is a great primer and the inspiration behind this post. He’ll explain further, but in case you can’t watch the video below, he focuses on simplifying the pricing process and using a “useless” price option, otherwise knowing as “decoy” marketing, that can send conversions through the roof.

Intriguing, right? Give it a view:

I’m sure some of you have already thought about how to put this into play at your dealership. Be it service, retail or fixed ops, this type of pricing can really work. Car shoppers are all bargain hunters. Pander to that and give them an option that really is “a great deal”.

Here is an example of how they put this in place at The Economist:

• Utilize a dedicated landing page focused on your special.
• Either expand your options if you don’t have enough (2 to 3) or simplify the choices (3+ to 3).
• Price #1 – Set the stage. Don’t go crazy low, as it is human nature to take the lowest price. Instead, make it competitive.
• Price #2 – Implement the “useless” price option.
• Price #3 – The one you want the customer to select. The best deal.
• Drive traffic to the page.

With every experiment, testing and re-testing are key to being successful.

• Consider A/B testing multiple landing pages, each with different price options.
• Split the traffic 50/50 or 33/33/33 to determine which is more appealing to a customer.
• Give it time and don’t give up too early. Patience will pay off.
• Once you find the magic combination, repeat, repeat, repeat.

If you already do or have done something similar, we’d love to hear your results. Good luck.

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Amir Co-founded Happy Hao Car in 2004 with Ali and has been instrumental in its success and growth. He is similarly held in high regards as a Digital Marketing executive and thought leader in the industry with a vast rolodex of most influential players and game changers. He is a popular, sought after speaker presenting educational seminars on industry best practices at Google Headquarters, NADA, and NCM 20 groups. Amir is focused on setting the direction for marketing efforts and partnership strategies to offer the best suite of services to Happy Hao Car customers. Prior to Happy Hao Car, Amir held executive positions in Sales and Internet Services at large Auto Groups like Penske, Van Tuyl and DARCARS which empower him with a unique ability to identify best solutions for the challenges Happy Hao Car customers face.

Join the discussion 4 Comments

• Hal Perez says: December 10, 2015 at 2:00 pm OK. I’m a simple carguy. Boil down for me and give me an example of how to use it. Right now I show my new Jeep Cherokee has a list price of $30,000 and my Sale Price is $25,000. How do I work this, 3 price strategy into my offer? Reply Amir Amirrezvani says: December 11, 2015 at 3:52 pm Hi Hal, great question. The most straightforward way to implement this decoy marketing experiment into your conversion optimization strategy is to always offer 3 options to your customers on a specials page or a landing page for sales or service. For the case you’re suggesting, an idea might be: Option 1: $25,000 – Jeep Cherokee Option 2: $30,000 – Jeep Cherokee (decoy offer) Option 3: $30,000 – Jeep Cherokee + 1 year of free car wash Like I said before and in the post, this all requires testing to see what sticks. Can’t wait to hear how it goes. Reply
• Jeff Kershner / DealerRefresh says: December 10, 2015 at 3:49 pm The useless price can be served as an option to HELP people figure out what THEY want to buy VS guiding customers to the package YOU want them to buy. Amir, would venture to say that incorporating a “useless” price would have more impact and effectiveness when incorporated in with a one price strategy? Reply Amir Amirrezvani says: December 11, 2015 at 3:51 pm Hi Jeff, The utilization of a useless price, or decoy offer, has the potential to be effective at one-price stores, but not in the same way. Typically, there is very little (if any) flexibility on pricing or special offers at one-price stores, so offering another incentive is not an option. The experiment I suggested won’t work the same way, but I might have a solution. It’s a lot easier for a customer to say no to one option, than it would be to three. For example, offer them: Option 1: $15,000 for Kia Sportage in very popular color Option 2: $15,000 for Kia Sportage in not so great color Option 1: $15,000 for Kia Sportage demo vehicle with a few thousand miles The goal is to have them drive off the lot with one of those (and you don’t care which one), so for the customer to see the options all priced the same, they are more likely to select one vs. the alternative of simply saying no to one choice. Of course, test, test, and test to determine the best pairings. Reply

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