Neither. It’s all a game of price decoys from The Daily, Rupert Murdoch’s flashy news magazine designed specifically for the iPad. Decoys are a form of price framing, in which consumers are given a somewhat bad-feeling deal that is meant to steer them to the second-best thing.
Decoys work because most of us want to feel smart, and yet all of us are inherently bad at judging value. Is a leather jacket worth $400? You don’t know … until someone tells you it’s marked down from $650, then it feels great! And if you haggle the price down more to $350, you walk out of the store a self-proclaimed hero. But you just shelled out $350 for a piece of stitched animal skin … perhaps truly worth only $70. When consumers are offered a “better deal than X,” or “20% off Y,” they can more easily satisfy the childish Id’s need to negotiate at every possible turn whether or not that process achieves true value.
Let’s watch how The Daily does it. If you download The Daily’s iPad app, you’ll get to read the magazine for about a week, and then a window pops up warning you, oops, you’re going to have to subscribe in seven days. Two green boxes give two choices:
Option 1: Only 99 cents per week to subscribe! That sounds low, so people bad at math might leap at that. (Bonus revenue for The Daily, cleverly raising rates on the portion of their audience self-selected for low IQs.) Like an ugly house a Realtor shows you before taking you to the house she really wants to sell you, this subscription offer is the price decoy.
Option 2: Only $39.99 a year! This is actually $12 less a year than Option 1, so people good at math will take this as the better offer. A-ha, you think, I’ve outsmarted The Daily, and I will go for Option 2, a better deal!
Of course, the pricing for either option is absolutely arbitrary. The Daily has already gotten you to download the app, and it has no incremental cost to distribute one more copy daily to your iPad, since you are paying for the Wi-Fi or 3G signal that delivers it. But by giving you a choice, The Daily has slowed you down enough to check out each offer, and to try to determine which is the better value. Since one price must be better than the other, you’ll feel good no matter which you pick. Right?