The Hidden Persuader: How Brands Use Decoys to Influence Your Choices
Ever been confused between large or medium popcorn in a theatre, had the server tell you it is only a ₹10 difference and then you succumbed? While worrying about how to finish the larger tub of popcorn & also consoling yourself you got a better deal, know that you have just fallen victim to the Decoy Effect.
What is the Decoy Effect?
The decoy effect leverages deliberately adding an unattractive third option which influences how we perceive the value of the original two.
While the decoy effect is often associated with behavioral economist Dan Ariely due to his popularization of it, the concept was actually first described by researchers Joel Huber, John Payne, and Christopher Puto in a paper presented in 1981.
Their work challenged the prevailing economic and psychological models of decision-making which assumed the “regularity principle”. This principle stated that adding a new option wouldn’t increase the likelihood of choosing an existing option. Huber, Payne, and Puto’s experiments demonstrated the decoy effect, highlighting a situation where a third option could indeed influence preference for one of the originals.
A common example of Decoy Effect which we see quite regularly are the prices of subscription services.
Here is an example of the various subscription plans of Spotify in India.
Each subscription plan differs by only ₹30 and hence users will easily gravitate towards the Family model even if they came for the Individual.
- Psychological Pricing: The jump from Duo to Family might seem smaller than the leap from Individual to Family i.e. the price difference between the decoy and the top-tier is strategically set to feel like a smaller jump than it truly is
- Fear of Running Out: The decoy taps into the fear of number of accounts reaching their limit, making the larger capacity seem like a wise future-proof option
Apple — Master of the Decoy
Apple is one of the most successful brands to leverage the decoy effect. Let’s take the iPhone. Each iPhone has 4 variants — the regular, Plus, Pro and Pro Max. Let me break down the difference in price point vs the features.
Based on the information of the prices of various models, take a guess at which was the bestselling model of 2023. The answer would surprise you.
iPhone 14 Pro Max & iPhone 15 Pro Max were the bestselling phones of 2023 despite their price band.
Apple’s decoy effect strategy isn’t about forcing customers to buy the most expensive option. It’s about subtly influencing their decision-making process, making the end-tier or pro max option seem more attractive relative to the base model. This can lead to increased sales of their higher-margin products. The widening gap between the Pro and Pro Max features seems to be a calculated move by Apple to show actual value in the models than just a dummy decoy.
The actual iPhone prices are not the only way Apple plays on the Decoy effect, the storage options for each phone also are a classic case.
The difference in price band between each storage category is only $100, which seems <10% of total price in most cases.
Here’s the thing: Apple’s success isn’t solely based on the decoy effect. Their products are undeniably high-quality and boast a sleek design. This brand image plays a role too. Because you value an Apple product, you might be more willing to consider the “better value” proposition of the seemingly superior option, even if the base model might technically suffice.
There are some key points to remember while leveraging the Decoy effect into your product.
- Genuinely ensure value at all price points: If you’re introducing a tiered product line, ensure the middle option offers genuine value that justifies its price point. Don’t just create a decoy to push people towards the top tier.
- Know Your Users: Consider your target market’s needs and budget sensitivity. A decoy tactic might backfire if the price gaps are too large or the value proposition isn’t clear.
- Transparency: Clearly communicate the features and benefits of each tier. Let your customers make informed decisions based on their needs, not just because of a strategically placed “middle child.”
The decoy effect is a fascinating tool in our marketing arsenal. By introducing a carefully chosen “decoy” option, we can subtly influence customer preferences and steer them towards the product that best aligns with our business goals.
