Although the existence of the grocery and its study have never been found, years-and-years of rumors began attributing the story to big-box chains and other retailers, all of which also have never been confirmed. Whether the story is true or not, it has become an analogy for the proliferation of predictive analytics and data mining in the retail industries, among others.
Add behavioral analysis to the mix and you get decoy pricing, “a tactic that boosts sales of high-profit items by creating another version of the product solely to make the pricier versions seem economical by comparison.” Take, for instance, a watch company with two products to present to consumers: an expensive, high-profit luxury watch and a low-cost, bare-bones watch. The watch company would prefer consumers buy the high-profit luxury watch, but would find that with these two options, a majority of consumers would purchase the less-expensive option. However, by taking advantage of the psychology of consumers, the watch company could create a third, middle-of-the-road watch and price it just a little less than the luxury watch, creating an option that makes the luxury watch seem like a bargain. The middle-of-the-road watch is a “decoy” meant to drive consumers to the choice the watch company wants them to make, the high-profit luxury watch.