Executive Report
The “decoy effect” is a psychological phenomenon often used in marketing, including e-commerce.
If consumers have an Option A and an Option B, they often choose whichever is cheapest. When the decoy effect is used, however, there is a third option, skewed to make the most expensive choice look like a bargain.
When they can compare Options A and B against an Option C (the decoy), buyers tend to choose the most expensive option.
One popular example is the subscription plans for the magazine The Economist. The magazine offers a Web subscription for $59 and a combined Web and print subscription for $125.
Between those two choices, people are more likely to choose the cheaper option. However, there is a third option: a print-only subscription for $125. This is the decoy, because it makes the combined subscription look like a great deal, making buyers more likely to choose it–and thus, spend more.
How can you use the decoy effect to increase sales?
No matter what you sell, there are a few techniques you can use to take advantage of this phenomenon.
- Keep the choices to exactly three.
Introducing more options complicates the decision-making process and diminishes the decoy effect. More choices give consumers more opportunities not to make the choice you want them to make.
FREE RESOURCE: Learn the psychology behind words that increase website traffic
- Don’t make the decoy too appealing.
Remember, the decoy is meant to direct buyers to the choice you want them to make, not to the decoy itself. The decoy’s price should be pretty close to the most expensive option, but with a slightly better value than the cheapest option. If the decoy seems a little ridiculous, that’s fine–it’s supposed to be!
- Be aware of middle bias.
If the three choices are being displayed on a shelf or website, you should also keep in mind that buyers also tend to be attracted to the choice in the middle, regardless of value. Because of this, you might consider displaying the desired choice in the middle, rather than arranging them by price.
Use the power of psychology to help your sales.
Correctly using the decoy effect can help your company close sales and increase revenue. For more help with your marketing strategy, contact CC&A Strategic Media.
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