The decoy effect is a simple yet amusing strategy used in the business to trick the customers into buying a more expensive product. However, the customer thinks that they are being provided with a better value for their money.

This article will learn more about the decoy effect and how it contributes to selling an expensive product in a business. We will understand the concept of the decoy effect through various examples too!

Read on to find out about the trick you can use in your business to have higher sales. 

1.  What is the Decoy Effect?

The decoy effect is also known as the asymmetrical dominance effect. It is considered a cognitive bias that occurs when people choose between two options when a third, more dominant option is introduced.

You can also say the decoy effect occurs when the customer is given a third option they are more likely to choose. This option is more expensive than the first two.

2.  Some Examples to Help You Understand the Decoy Effect

i) National Geographic Popcorn Bucket Experiment

We will tell you about an experiment the National Geographic ran to make it a little more simple for you to understand the decoy effect. This experiment will show how National Geographic influenced the customer to buy the large popcorn bucket rather than a small or medium one.

They introduced two choices in popcorn to the customers, i.e., small for $3 and large for $7. The customers begin to buy the small ones. However, for the second group, National Geographic introduced three choices in popcorn, i.e., small for $3, large for $7, and medium for $6.5. In this group, most people bought the large popcorn because they saw $0.5. The decoy effect was used here to make the large bucket asymmetrically dominant to the medium bucket! It helps the company make more profit because it influences customer decisions, and they buy the expensive option.

the Decoy Effect

ii) Study to See How Decoy Effect Impact Everyday Decisions

Chris Puto, John Payne, and Joel Huber conducted this study on a group of people. They gave a group of people two options to choose from: a three-star restaurant that was 5 minutes away and a five-star restaurant that was 25 minutes away. They wanted to see if people choose convenience or quality.

Then the researchers added another option to the choices: a four-star restaurant located 35 minutes away. Can you guess what the people in the second group chose? Well, most people chose the five-star restaurant that was 35 minutes away. But why? Due to the decoy effect. The third option, i.e., the four-star restaurant, was asymmetrically dominated by the five-star restaurant and made it seem closer and even had a higher rating.

iii) The Economist Subscription

On an old subscription page, there was an example of the decoy effect. There were three options published: $125 for a print subscription, $59 for an electronic subscription, and $125 for print and electronic submission. The first option seemed reasonable; the second option seemed expensive. However, the third option offered both print and electronic subscriptions.

Which one do you think was the most popular choice? No student chose the first option. The most popular choice was the third option. However, when the first option was eliminated, most students chose the second option. The first option is there to cause the decoy effect only. It was never a practical option.

We hope you understand how the decoy effect can make an impact on customer buying behavior.

3.  How can a Business use the Decoy Effect to its advantage?

You can use the decoy effect for your business and take advantage of it by making more profits. How? Here are a few steps that will help you understand how to make profits using the decoy effect and implement the decoy effect strategy in your business plan.

  • Pick the product or service you want to sell. For example, if your business is a restaurant, you need to pick a product that you think will sell best if the decoy effect is applied. Let’s assume you want to sell fries using the decoy effect.
the Decoy Effect
  • Make sure the customers already like the product that you have chosen. This step is crucial because you want to make the maximum sales, and it’s best to apply a decoy effect on a product that is already the customer’s favorite.
  • Now, it’s time to create the decoy effect! It would help if you created a third option to increase attractiveness towards the product you want to sell most. Make sure you have at least three options. Also, note that more than three options might create decision paralysis.
  • Now you have to come towards the pricing. You need to price your product that aims to have the decoy effect close to your essential product, i.e., the product you want to sell the most. You need to make sure that you price the decoy slightly less but close to your essential product. For example, if you sell fries, you can sell small at $3, medium at $5.5, and large at $6.5. This will create more value for the large fries because it provides more weight than the medium fries.

Summary of the Article

In this article, we aimed to introduce the decoy effect and how you can use it in your business to make higher profits. We gave two different examples to create a better understanding of the decoy effect.

The decoy effect is a scientifically proven method that can be used in any business. You should give it a shot and see if it works for you!

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