Decoy Effect : How it makes you end up buying what you don't want?
I went to watch a film in Tachyon (the best theater in the heaven), and I felt like eating a popcorn. So, I went to the popcorn shop and looked at the price list. It was,
Small - $3
Large - $7
Then I thought, mmmm. I don't want a large popcorn. It's just me. Though I am the king of the heaven, I don't need to waste my money on popcorn. So I bought the small popcorn. Then I went inside the theater and enjoyed the movie while eating the popcorn. Actually the popcorn tasted heavenly. It was awesome. i had never eaten such a tasty popcorn before.
After about a month, another film came and I felt like watching that too. I went to the theater and walked straight forward to the popcorn shop to buy a small popcorn. But, this time the price list was little different.
Small - $3
Medium - $6.50
Large - $7
I was like WTF... A medium for $6.5? I can buy the large one just $0.50 more and it's such a bargain. I handed $7 with my whole heft and grabbed the large popcorn to take the $0.50 advantage.
You know, actually I went to buy the small popcorn as I did in the previous day, but what happened? I ended up buying the large popcorn which I rejected last time by thinking a waste if money. For more fun, this time I thought it is an advantage.
What made me to think like that? Why it happened to me? Do you know what is interesting here? You have done the same for many times. Can you count the times you have done the same?
The $6.50 medium popcorn did this everything. We call it the decoy and here's how the it works.
What is decoy effect?
"The decoy effect is a phenomenon whereby consumers will tend to have a specific change in preferences between two options when also presented a third option that is asymmetrically dominated."
That was the definition given by HumanHow.com. What does that mean? Okay, let's get into my situation again.
First time there was only 2 option as small and large. So, I felt like buying the large is a waste of money and I ended up in buying the small popcorn for $3. But, in the second situation, which is higher in price than the small but way more less in quantity than the large (but the price was so close to the large).
At this point, the emotion of wastage of money was invalid, because when I so the price of the medium is just less $0.50 than the price of the large and it is way more less in quantity than the large, I started to compare medium and large. Then I thought, buying the large for extra $0.50 would be more advantageous, because here I started to think about the quantity. Not only the price.
Here the medium popcorn is the thing what we call decoy. Decoy is the item which is insert to the price list as an agent of highlighting the need of the target product to the consumer. In my case, the $6.50 medium highlighted a need to buy the large popcorn which is way more higher in quantity than the medium, yet $0.50 higher in price. We can call the medium popcorn was asymmetrically dominated by the large popcorn.
What is Asymmetrical Dominance?
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.
It was the definition given by TheConvertion.com
Will you believe me, the situation I told was actually happened as an experiment in your Earth? It was done by National Geographic.
Now you should be so clear about "WTF is going on. How they made me to buy the big deal without noticing me?" It's a deal with psychology. The 3rd party interference (the decoy) to the price list divert consumers from buying the small to the big deal.
What will Happen If the Decoy Doesn't Exist?
May I bring you an attractive video for that question without typing words over words. So, you will be crystal clear when the video ends.
How to Implement the Decoy Effect?
There are steps to implement in order to maker the decoy effect effective.
Choose your key product - The one you want to sell more of. Make sure it is popular with your customers.
Structure your key product - Remember, your key product should contain more benefits than the other products, and higher priced.
Create a decoy - Your goal is to make the decoy asymmetrically dominated by your key product and to increase your key product attractiveness as a result.
Have at least three offers (recommended) - However, don’t add more than five (beware of the choice overload bias).
Price the decoy close to your key product (the high-priced option) - Choose same or a slightly lower price.
Decoy effect is a scientifically proven method where a marketer can play with the emotions of consumers and make them needy. So, shot your business with decoy effect and see how the sales grow up.
References
HumanHow.com - https://humanhow.com/en/the-decoy-effect-complete-
TheConvertion.com - https://theconversation.com/the-decoy-effect-how-you-are-influenced-to-choose-without-really-knowing-it-111259
Huber, J., Payne, J. W., and Puto, C. 1982 - Adding asymmetrically dominated alternatives: violations of regularity and the similarity hypothesis.
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