The decoy effect is one of the most robust, scientifically backed psychological principles regarding sales and marketing.
Here’s what it is and how you can use it.
The decoy effect (asymmetric dominance) is: “…the phenomenon according to which the choice probability of a baseline alternative increases when an inferior alternative—the decoy—is included into the choice set.”
In other words, people are likelier to choose an option when you add a worse option (the decoy).
For example: Which of these options is the better deal?
How about now?
Nothing has changed about the two viable options. However, people are exponentially more likely to choose the large now because of its comparative dominance to the newly introduced decoy. And I’m not using the word “exponentially” like a millennial; I mean exponentially.
There are amazing studies on the decoy effect and its impact on “rational” decision making. It’s staggering to see its impact on people’s choices.
What’s more interesting is its impact on whether people even choose the first place.
The decoy effect doesn’t just push consumers to purchase the better of the compared options; it increases the number of consumers.
Given two viable options, people are far less likely to decide and simply pass on the opportunity. But, given a decoy…
People can’t pass up a good deal! As soon as you introduce a decoy that intentionally flatters one of your viable options, you increase the likelihood that they’ll decide at all.
Said like a marketer: The decoy effect doesn’t just increase AOV; it increases total conversions.
So, give people something to say no to! Introduce a decoy into your pricing strategy and see what happens.
If you’re interested in learning more about the decoy effect, check out the following:
“Predictably Irrational” by Dan Ariely
“Thinking, Fast and Slow” by Daniel Kahneman
Tracking the decoy: maximizing the decoy effect through sequential experimentation
What’s the best example of the decoy effect that you’ve ever seen used? I’d love to know!