The decoy effect – a cunning marketing strategy used by marketers to influence you into buying what they want. In this article, I will explore what the decoy effect is and how marketers use it right under our noses to control what we buy.
What is the decoy effect?
Strategically applied by marketers, decoy effect is the addition of a third less attractive option between two original choices. Decoys are extremely inferior to the first option: the target, and partially inferior to the second: the competitor.
The National Geographic conducted a social experiment on how decoy effect could influence people into buying a large popcorn bucket rather than a medium or a small sized one.
The experiment began with two popcorn buckets: one small priced at $3 and the other large at $7. A large number of people bought the small bucket because they felt it was more convenient to buy a small one as opposed to the big one.
In the second round, a third option was added: a medium bucket priced at $6.5. As expected, a large number of people bought the large bucket because they saw the value for money. The medium popcorn bucket was the decoy which influenced people into buying the large popcorn bucket: the target.
Simply put, the phenomenon of consumers changing their preference between two options when presented with a third option is known as the asymmetric dominance or the “attraction effect.”
The asymmetric dominance was first described by Joel Huber and John Payne and Christopher Pluto in a conference which was later published in Journal of Consumer Research in 1982. They conducted several experiments with university students to show how asymmetric dominance worked. The students were asked to make choices in scenarios which involved cars, lottery tickets, films, television sets and so on.
In each scenario, the participants were given two options followed by a third option – the decoy. The decoy successfully worked each time the students were asked to make a choice. The decoy made the students choose the target over the competitor each time except in the case of lottery tickets.
The findings of the experiments were revolutionary in terms of marketing since they broke all the established notions regarding the “similarity heuristic” and the “regularity condition.” These established notions propounded the theory that a new product will always emerge victorious in the market and the probability of a consumer choosing the original product will increasingly diminish.
How decoy works
According to psychologist Barry Schwartz, consumers experience paradoxes of choice when they are faced with too many alternatives. Choice overload hinders decision-making since it increases the anxiety of the consumers.
When faced with choice overload, consumers tend to simplify the process by selecting specific criteria, such as quantity and price, to make a final choice. The decoy is intelligently used by marketers exactly when consumers are faced with the paradox of choice and are trying to mentally simplify the process. Decoy manipulates the decision making process by steering the attention of the consumers to the target option.
Decoy, therefore, is a form of nudging. Richard Thaler and Cass Sunstein, pioneers of nudge theory mentions, “Any aspect of choice architecture that alters people’s behavior in a predictable way without forbidding any options.”
Where this bias occurs
For this, I will again get back to the movie theatre. What can be better than a father-daughter day out? After all the shopping and ice creams it’s time to go watch that superhero movie you’ve been waiting for so long! After buying the ticket you make up your mind to get a medium-sized popcorn bag for you and your daughter. When you get to the snack bar you see the small bag is priced at $2; the medium at $5.50; and the large at $6. You end up buying the large one even though you didn’t need it since it seemed like an awesome deal! Guess what? Decoy effect played its part!
The decoy effect is so powerful that it can cause us to consume more than what is actually required. We base our decisions on what will be more advantageous than what would better suit our purpose when a decoy option is placed right between our choice and what the marketers want to sell.
The decoy effect tricks us into believing that we have made a smart choice when in reality it was all staged by the marketers and the advertisers. The decoy effect, most of the time, makes us choose the most expensive option than actually intended.
Decoys are at the forefront of marketing strategies by businesses and corporations. It is strategically used by brands to “nudge” us into spending more than we intended to on a product or service. Falling prey to decoy effect continually can damage our finances and also cause health problems.
Soft drinks and many other unhealthy foods are commonly pushed with decoys, overconsumption of which can cause serious health related issues in the future. From heart diseases to chronic conditions, all have been directly or indirectly related to overconsumption of unhealthy foods. However, unhealthy foods are not the only products that use decoy. Sellers of electronic goods, cosmetics, clothes and accessories often use decoy to their benefit.
Used as a marketing strategy, decoy pricing not only increases profits but also boosts the overall image of the target product or service. Advertisers and marketers use decoy pricing to make the target option appear superior in comparison to similar products that have a low price tag. In other words, the customers are led to believe that expensive products are superior over their cheaper counterparts.
Though consumers can easily fall prey to decoy marketing strategies, taking a closer look at things will enable you to comprehend when decoy has been used. ‘How to avoid being influenced by the decoy effect’ in the bonus section of this article will guide you in keeping away from decoys.
How does decoy pricing influence people?
The decoy effect really influences people at the psychological level. Marketers generally achieve this by following three powerful marketing techniques. They are:
- Selective perception
- The compromise effect
- The attraction effect
Simply put, the tendency of the human mind to simplify things when presented with a confusing situation falls within the realms of selective perception. When a consumer is presented with more than one choice he will narrow it down to that one product which looks attractive or is priced better.
The compromise effect
Based on the theory that consumers tend to choose products or services of average value and pricing, the compromise effect, when used by marketers, amplifies the desire of buying products of median value within the customers.
When presented with three variants of similar products, consumers tend to overlook the one which is the least expensive. Consumers believe that the one which is the least expensive is also poor in terms of quality and performance. Similarly, the one which is high-priced is believed to be expensive and may have additional features which the consumers might not require. Therefore, they are more likely to choose the product with median value since it appears to provide most features and at the same time, affordable.
Which one would you choose from the below?
The attraction effect
The terms decoy effect and the attraction effect may be used interchangeably. The act of consumers changing their preference when presented with a third more alluring choice is known as the attraction effect.
The National Geographic social experiment, mentioned in this article, can help you understand the attraction effect.
Why it happens?
The following are the reasons why decoy effect is so effective:
1. It provides a justification for the choice customers makes
When consumers make decisions, their aim is not to pick the right option but to justify the outcome of a choice they have already made.
A recent study shows that the decoy effect became stronger when participants were asked to justify their selection. The participants emphasized the pros of choosing the target and the cons of choosing the competitor.
2. Decoys work at a subconscious level
The decoy effect is a great example of a behavioral nudge – an intervention that guides consumers to make a certain choice. The decoy effect does not violate free will but works on a subconscious level making the consumers believe that the choice they made was done so independently.
3. Decoys have a calming effect
The “paradox of choice” can be extremely overwhelming for customers. When customers are given too many choices, the inability to pick one product can get increasingly difficult. Decoys work like magic in these situations: calming the consumers and providing a nice-sounding explanation.
4. Decoys capitalize on loss aversion
Loss aversion is based on the theory that people hate losing more than they like winning. The theory describes how, for most people, it is more distressing to lose a given amount than it is amusing to gain an equal amount.
Finding $10 on the street can make you happy for a while but losing $10 straight out of your wallet can be more distressing and ruin your whole day.
Loss aversion causes the customers to look at the disadvantages of a product or service when making the final decision. Marketers brilliantly use the theory of loss aversion to create decoys.
How decoy effect increases sales revenues
The ultimate purpose of any marketing strategy is to increase profit margins. The decoy effect works like a magic wand when used the right way by marketers.
The decoy effect leads a consumer to believe he is making an informed decision while buying the most expensive product variant. This is how decoy effect increases sales revenue, thereby increasing the profit margins.
Be it large-scale industries or Small and Medium Enterprises (SME), decoy effect remains a formidable marketing strategy which helps in increasing sales revenue and profit.
Now that you know what decoy effect is and how marketers use it to increase the sales revenue, it is now time to look at ways by which we can avoid being influenced by the decoy effect.
How to avoid being influenced by the decoy effect
Simply being aware of the decoy effect’s existence is not enough to avoid it. The decoy effect is so beautifully disguised by marketers that it feels natural for a consumer to get attracted to it. However, there are a few ways by which you can avoid getting enamored by the charisma asymmetric dominance.
1. Only buy the things you need
Decoy effect is not really that bad when you come to think of it. Sometimes opting for a larger size or a better-quality version of the given product could be exactly what you need. However, it is equally important to spare some time thinking about what you really require.
It is always helpful to focus on the reason for buying something. Ask yourself whether you need a larger/expensive/better-quality variant of a product. Answering these questions can really help you make a final decision.
2. Look out for sets of three
Whether you are out shopping or looking at a political candidate, look out when there are three options. The decoy effect is most powerful when there are only three choices: target, competitor, and decoy.
3. Don’t trust your instincts
A recent study, which involved over 600 participants, found that people who relied mostly on their instincts were the ones most influenced by decoy effect. While relying on your intuitive reasoning has its own perks, logical reasoning can often prove beneficial when trying to make a final decision.
4. Decide what you need ahead of time
Not knowing what you really need or what factors must be taken into consideration when making a decision makes us an easy prey for the decoy effect. So, every time you sit to browse through your options, taking some time off to figure out exactly what you need may be a good idea.
Decoy effect or the attraction effect is a widely used tool by marketers around the world. While it is true that the decoy effect has its set of advantages, from the consumer’s perspective, it mostly works in the favor of companies employing the strategy. So think well and think hard before heading to that store near you!
Business Development Manager with a demonstrated history of working in the Media and Digital marketing sector, Passionate about innovation and bringing the future into new business solutions.