The Decoy Effect is a marketing psychology phenomenon that explains how humans tend to make decisions between two options when a third, ‘decoy’ option is added. This phenomenon is closely related to behavioural economics, the study of decision making, and the well-known concept of choice architecture.The Decoy Effect provides a valuable window into how people think and make decisions. It is a useful concept for strategists to understand how to position and evaluate choices to better understand why certain decisions are made.
What Is The Decoy Effect?
The Decoy Effect, also sometimes referred to as the Decoy Option or Decoy Price Strategy, is a cognitive bias that leads people to make a certain choice when faced with a set of options. The principle behind the Decoy Effect is that when faced with an even number of options, people will logically compare them and make a decision based on the pros and cons of each. However, when presented with an odd number of options, the added “decoy” option can sway people to make a certain decision.
The decoy option does not have to be the most or least appealing option, making it very difficult for people to determine if it is a viable option at all. The main purpose of the decoy option is to make the other two options seem more attractive in comparison. This effect is sometimes referred to as a “menu effect” because it is commonly used by restaurants to make certain menu items appear more desirable than others.
When Does The Decoy Effect Work?
The Decoy Effect is most effective when the two comparison options aren't particularly different from one another, and the decoy option is clearly inferior to the other two. For example, if you are presented with three different sizes of a product; a small, medium, and large, but the medium and large are too similar to make a logical choice between the two, the decoy effect would come into play. If the large size is slightly cheaper than the medium size, but the decoy size is much more expensive than both, people will be more drawn to the medium size because it is more reasonably priced than the large, while also less expensive than the decoy option. This makes the medium size appear more attractive than it was before the decoy option was added.
General Guidelines And Best Practices
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When you are applying the Decoy Effect to a marketing strategy, there are several general guidelines and best practices that should be considered.
1. Keep It Simple: Your strategy should be easy for people to understand. You want to avoid over-complicating the situation with too many options, as this will lead to analysis paralysis and indecision. Try to keep the number of options to a minimum and present clear comparisons between them.
2. Have A Clear Goal: You should also have a clear goal in mind when designing your strategy. What is the outcome you are hoping to achieve? Do you want people to choose one option over another, or purchase more of a particular product? Knowing what you aim to accomplish will make it easier to craft a compelling decoy option.
3. Leverage Visual Cues: Visual cues can help draw attention to certain products or options in a way that is often more effective than words alone. For example, you could use a bright colour to highlight a specific choice you want people to make, or use a different font size or design elements to make one option stand out.
4. Be Transparent: It's important to be upfront about the price points and features of the options you are presenting. People will quickly become frustrated if the pricing structure is unclear or does not make sense. Likewise, if the decoy option is too similar to the other two, it will be obvious that it is just a ploy to influence buyer behaviour.
5. Consider The Customer: Finally, it's important to keep the customer in mind when designing your strategy. Ask yourself how your proposed decoy option might affect their decision-making process, and consider how it will fit in with their overall buying journey.