Decoy Effect

Adding a less desirable option (the decoy) makes other options seem more appealing.

What is the Deocy Effect?

Goal Dilution explains the way we perceive the quality of products or services. Here's how it works:

Two initial options: You’re presented with two options, let's call them Option A and Option B. You may have a slight preference for one over the other, or you may be indifferent.

The Decoy: A third option (Option C) is introduced. This option is designed to be inferior to Option A in all aspects but only slightly inferior to Option B in some aspects.

Shift in Preference: The presence of the decoy, Option C, makes Option A appear significantly more attractive in comparison. This leads people to shift their preference from Option B (or indifference) towards Option A.

The evidence it works

In a study conducted by Joel Huber in 1981, a group of people were asked to choose between two options: (A) a five-star restaurant that was 25 minutes drive away, and (B) a three-star restaurant that was 5 minutes drive away.

Each person in the group chose according to their personal preference.

Huber then asked a second group to choose between three options - adding (C) a four-star restaurant located 35 minutes drive away.

The result showed that most of the people chose (A) the five-star restaurant option.

Why? The addition of (C) the four-star restaurant was ‘asymmetrically dominated’ by (A) the five-star restaurant in both driving distance and restaurant ranking.

The decoy effect made option (A) look particularly attractive.

In his book Predictably Irrational, Dan Ariely describes an experiment where he manipulated the pricing of The Economist magazine subscriptions to demonstrate the decoy effect. By adding a decoy option (a print-only subscription), he was able to significantly increase the choice share of the more expensive print-and-digital subscription.

How it builds brand memorability

One of the key drivers of brand memorability is ‘Ease’.

If you make your brand easy to access, deal with and buy from, you’re going to build strong, positive connections that lead to memorability.

At the point of purchase, or during the journey to purchase, customer’s decision-making can be made easier by leveraging behavioural biases. And METRIC is our tool for harnessing the power of these biases - snap judgements that help the brain make quick decisions in context - for clients.

METRIC organises the biases into six categories - because these are the key ‘resources’ we always have to spend when make decisions. They are Money, Effort, Time, Risk, Individuality, and Conscious thought. Which handily spells METRIC.

So presenting choices in one of these six frames can tip the balance in comms.

Great examples of Decoy Effect in marketing

Apple use a decoy effectively in their ecommerce

The already premium price tag of Apple’s products makes the decoy effect even more effective. When you look at Apple’s iPod Touch, for double the storage capacity – going  from 16GB to 32GB – you pay $70 extra and get more features, such as a 5MP iSight camera and iPod Touch Loop.

But when you want to double the capacity from 32GB to 64GB, you pay $100 more but you don’t get extra features for it. This makes the 32GB the more desirable option. Only a few would buy the 16GB and even fewer the 64GB..

Sonoma raised its sales using the decoy effect

When Williams – Sonoma introduced a bread making machine priced at $275, it sold really poorly. So they introduced a premium version that cost twice as much, with just a few little upgrades. The cheaper one sold out because people could see that it was good value in comparison with the other. And so the decoy effect strikes again!

So if you want to sell more of something, give people another option, make it  similar and make it less attractive..