Imagine walking up to movie theater concession stand. On display are three bags to show popcorn sizes. The first is a small bag that costs $4.99. The second bag is a little bit larger at $6.99. The third bag is huge and costs $7.99. Which one do you pick? When people are exposed to this set of options they often pick the largest on the perception that it is the best value. However, have they been tricked into spending more than they normally would? In other words, have they fallen for a decoy?
In an article by Gary Mortimer, the Decoy Effect is demonstrated to be a classic sales trick. What is a decoy?
The decoy effect is defined as the phenomenon whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated”. It is also referred to as the “attraction effect” or “asymmetric dominance effect”.
What asymmetric domination means is the decoy is priced to make one of the other options much more attractive. It is “dominated” in terms of perceived value (quantity, quality, extra features and so on). The decoy is not intended to sell, just to nudge consumers away from the “competitor” and towards the “target” – usually the more expensive or profitable option.
Later in the piece, Mortimer shares a very illuminating example of how the Decoy Effect can change people’s choices, even when the decoy is obviously worthless. This comes from the work of Dan Ariely.
In one scenario the students had a choice of a web-only subscription or a print-only subscription for twice the price; 68 percent chose the cheaper web-only option.
They were given a third option – a web-and-print subscription for the same price as the print-only option. Now just 16 percent chose the cheaper option, with 84 percent opting for the obviously better combined option.
In this second scenario the print-only option had become the decoy and the combined option the target. Even The Economist was intrigued by Ariely’s finding, publishing a story about it entitled “ The importance of irrelevant alternatives”.
So next time you shopping in the mall or online, keep your eyes open for the Decoy Effect. It might be a fun game to play and save you money at the same time.