We’ve all been there… You’re at the movies, and a small or medium popcorn would be sufficient to satisfy your cravings, but yet you suddenly find yourself with a huge bucket of popcorn in your hands. You have probably just fallen for the Decoy Effect! But what does actually happen in your head, and how does this affect your choices? The reason is simple.
Multiple behavioral experiments have consistently shown that making a difficult choice increases anxiety and hinders decision-making. In an effort to reduce that fear, we as consumers tend to simplify the process by selecting just a few criteria (e.g., price, quantity, or number of qualities) to determine the best value for money.
Marketeers create decoys to help you justify your decision for a certain product. Besides that, it also changes the value of the other options. A decoy isn't meant to be sold, it’s meant just to push consumers away from the "cheaper option" and towards the "target," which is usually the more expensive or profitable option.
The decoy effect is subtle, yet powerful. The process is simple. Choose the item you want to sell. Add two more options, one of which is the decoy, and watch the sales increase. It's almost too good to be true, but it continues to work.
Come up with three options
The distraction effect doesn't work with two options. The effect is also reduced by more than three options. You really need to use three options in order to gain the most advantage out of the decoy effect.
Make sure the three choices are asymmetrically priced
A decoy is there to guide the customer to the other (often more expensive) options. For this reason, it is good to make the decoy seem like a bad choice. The decoy must be priced relatively expensive so the ‘target’ seems reasonably priced in comparison. And because the lowest-priced option A does not contain the best elements/functions, people will often choose option C because it seems like a better deal in comparison to the asymmetrically priced decoy option B and the lowest-priced option A.
Price the decoy closer to the expensive option
The price difference between the decoy and the expensive option should be negligible compared to the price difference between the decoy and the cheaper option. With popcorn you would rather buy the Large than the Normal size if it was just 50 cents extra. That is why you make the decoy slightly cheaper than the more expensive option.
Make sure the decoy option seems like a bad deal in comparison to both other options.
This way the ‘target’ you’re trying to push your customers towards will look much more of a good deal in comparison to the decoy option. Price isn't everything, of course. In addition, there are other elements that you compare to make a choice, such as the number benefits. You make those qualities marginally better or worse than the other choices.
At Kemari we believe that the asymmetric decoy option changes customers from 'bargain hunters' into 'value seekers'!