Question 1

What are anchoring, charm pricing and the decoy effect?

Accepted Answer

Three well-documented ways in which **the presentation of a price changes how it is judged** — because people evaluate prices **comparatively**, not absolutely, and have no independent sense of what most things should cost.

**Anchoring.** The first number seen becomes the reference point everything else is judged against. A £200 item shown beside a £500 one is evaluated as cheap; the same item alone is evaluated on its merits. This is why **a recommended retail price is shown next to a sale price**, why menus place an expensive item prominently, and why the highest tier of a pricing page exists even when few buy it.

**Anchors work even when obviously arbitrary**, which is what makes the effect notable — experiments find irrelevant numbers shifting subsequent valuations.

**Charm pricing.** Prices ending in 9 or 99. The usual explanation is **left-digit truncation**: £4.99 is encoded starting from the 4, and the perceived difference from £5.00 exceeds one penny. Evidence supports real effects on demand, though they vary by category.

**The counter-effect matters:** 9-endings also signal **discount and value**, which is why premium brands avoid them — a £5,000 watch priced at £4,999 reads as cheap in the wrong way. **Round numbers signal quality and simplicity**, and are used deliberately in luxury.

**The decoy effect (asymmetric dominance).** Adding a third option that is **clearly worse than one option but not the other** shifts choice toward the one that dominates it. The classic demonstration: a small popcorn and a large popcorn split choices; add a medium priced just below the large, and the large's share rises sharply — because the large is now visibly better value **than something**.

**Why this matters even if you never set prices.** It works on you, and the defence is to **establish your own reference point before looking** — decide what the thing is worth to you, or check an independent price, before the seller's framing supplies one.

**Regulators police the boundary**: fake reference prices and misleading was/now claims are unlawful.

Question 2

How do loyalty programmes actually make money?

Accepted Answer

Rarely through the loyalty itself. Most programmes earn through a combination of margin funded by suppliers, changed purchase behaviour, unredeemed value, and — for the largest schemes — selling the

Question 3

Why can a high click-through rate be a bad sign?

Accepted Answer

Click-through rate (CTR) is clicks divided by impressions. It measures how compelling something looked — not whether the click was worth having. A high CTR paired with poor downstream results usually

Question 4

What is brand lift measurement?

Accepted Answer

Measuring whether advertising changed what people think — awareness, recall, consideration, favourability — rather than what they immediately bought. It exists because a great deal of advertising

Question 5

What are category entry points?

Accepted Answer

The situations, needs and moments that prompt someone to think of a category at all — and the argument, from the Ehrenberg-Bass Institute, is that brands are chosen by being mentally available at

Question 6

What is a retail media network, and why is every retailer building one?

Accepted Answer

A retailer selling advertising inventory against its own shopper data — on its website, in its app, in physical stores, and increasingly on other websites entirely. It has become the fastest-growing

Question 7

What is out-of-home advertising, and how is it measured?

Accepted Answer

Advertising in public space — billboards, transport, street furniture, retail and increasingly digital screens — and its measurement problem is fundamental: you cannot ask a poster who saw it. The

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