Influencing people's choice between two options by adding a third option
Description
People change their preference between two options when presented with a third option (the decoy) that is “asymmetrically dominated”.
It is also referred to as the “attraction effect” or “asymmetric dominance effect”.
The decoy effect can make us spend more than we want.
Decoy option makes us make decisions not on what we need, but based on what feels like the most advantageous choice.
Attraction Effect - inferior product's ability to increase the attractiveness of another alternative product when the inferior product is added to a choice set.
Compromise Effect - the product will have a higher chance to be chosen from a product choice set when its characteristics are not the extremes (the best with the highest price or the worst with the lowest price).
Research:
In one experiment, customers were offered a small popcorn for $3 or a larger one for $7. Most of them chose the small bucket which was aligned with their personal needs. However, with a decoy option of $6.5, most people chose the large popcorn.
Application
E-commerce Product Bundles
In the realm of e-commerce, retailers can apply the Decoy Effect by designing product bundles that make certain options more attractive. For instance, imagine an online store selling high-end kitchen appliances. The store could offer three purchasing options:Option A: Premium Blender - $200 Option B: Premium Blender + Basic Accessory Set - $250 Option C (Decoy): Premium Blender + Premium Accessory Set - $300. In this scenario, Option C serves as a decoy to make Option B appear more valuable. Customers might perceive the jump from just the Premium Blender to getting it with a Basic Accessory Set for only $50 more as a better deal when they see the price increase to get the Premium Accessory Set doesn't provide proportional value. This strategy can nudge customers towards choosing Option B, which offers a perceived higher value for the price increase from Option A.
Online Course Enrollments
Educational platforms and online course providers can use the Decoy Effect to guide potential students towards certain courses or subscription plans. Consider an online learning platform offering courses in digital marketing:Option A: Basic Course on Social Media Marketing - $150Option B: Comprehensive Digital Marketing Course (including Social Media Marketing) - $500Option C (Decoy): Social Media Marketing Course + Additional Resources (less comprehensive than the full Digital Marketing Course) - $450. Option C is designed as a decoy to make Option B seem more appealing by comparison. The price difference between B and C is small, yet the value difference (in terms of course comprehensiveness) is significant. This setup encourages students to opt for the Comprehensive Digital Marketing Course, seeing it as a much better investment compared to the decoy option, which doesn't offer as much value for a slightly lower price.
