"A snippet from Dan Ariel's TED talk. This is a great illustration on the psychological effects of options pricing."

"The price in the middle, while seemingly “useless” in that it didn’t provide any value (since the print + web was the same price) was actually useful in that it helped get costumers to turn from “bargain hunters” to “value seekers”.

What was happening was that customers began to compare the middle option to the latter option (since their prices were similar) and this comparison made option 3 look like an excellent deal.

Without the middle option, we can see that the price points set by the economist had too much contrast: when the middle option was taken away, people looked at the two prices and tried to convince themselves that they didn’t need the “upgrade”.

Essentially, they became “bargain hunters” rather than “value seekers” which are the kind of customers you really want.

With appropriate pricing in place, you can offer customers options that fit their budget, while at the same time influencing “on the fence” customers that your more premium offerings give enough benefit that their extra price is justified."