In marketing, the decoy effect, also known as the attraction effect or asymmetric dominance effect, is a psychological phenomenon in which consumers are said to have a distinct change in preference between two alternatives when simultaneously presented with a third option that is asymmetrically dominated.
Rather than based on absolute preferences, consumers’ decisions are frequently constrained by what is available. The decoy effect, also known as an asymmetrically dominated option, occurs when people’s choice for one option over another change due to adding a third option (similar but less appealing) alternative.
It can dramatically affect consumers’ decision-making process.
The decoy effect definition
An option is asymmetrically dominated when the opposed or superior alternative is inferior in all ways to one option but superior in some respects and deficient in others when compared to the other option.
In other words, it is entirely dominated by one choice and only partially dominated by the other in terms of specific features that influence choices.
If you want to learn more about the social influence we covered it in a separate article.
When the asymmetrically dominated alternative is available, more customers will select the dominant option than when it isn’t. Thus, a decoy option serves to boost the appeal of the dominant alternative by being asymmetrically dominated.
The decoy influence is yet another illustration of decision theory’s axiom of independence for irrelevant options. Simply put, an unattractive third option may alter the perceived preference between two preferable options.
How does the decoy effect work?
We’ll start with the basics of “asymmetric dominance,” which is a term that refers to when one person or entity has more power than another. In an ideal decoy scenario, there are three alternatives:
The target is what people want to persuade people (for example, a company) to do.
The competitor is the alternative that is competing with the target.
The decoy is a strategy that is used to entice you towards the target.
The decoy effect hinges on the decoy being asymmetrically dominated by the target and competitor in at least two criteria—let’s call them A and B. This implies that the target is better than the decoy in both A and B, while the competitor may be superior in one but not both.
For example, the client is considering popcorn options based on two criteria: size and price. The target is the large popcorn, while the competitor is the tiny one. Because the medium popcorn is asymmetrically dominated by the other two, it serves as a decoy.
Larger is indeed better, according to many consumers. Although this claim may seem obvious, it is not always the case. Unlike the small, which contains less popcorn and is thus cheaper per unit, the large has more popcorn and is somewhat more expensive than the medium.
Why is the decoy effect important?
Consider this research conducted by psychologist Dan Ariely, which looked at the decoy effect in decision-making. He examined the pricing strategy of the Economist offers three subscription options: $59 for an online subscription, $125 for a print-only subscription, and the third option – $125 for both print and online access.
He asked his students to choose one, and 16 percent of them voted for the less expensive online subscription. However, 84% of the students preferred the print & web subscription, and nobody selected the $125 print-only option.
The second experiment asked another group of students to choose from the remaining two alternatives—the $59 online subscription or the print & web subscription (which was still available). Only 32% chose the print & web subscription this time, compared to 68% in the first study.
Ariely said, “The most popular option became the least popular, and the least popular became the most popular.” So even though a majority of the class would have been satisfied with an online-only subscription.
Adding a decoy pushed them to spend almost $70 extra on something they didn’t truly need, and this was an asymmetrically dominated option.
Companies can subtly bias our judgments by adding a decoy to an array of goods, and this influence accumulates over time.
How to use the decoy effect?
Decoys may be found in various places, from cheap foods like popcorn to larger goods such as airline tickets. The decoy effect is exacerbated because we are unaware we are being influenced instead of thinking that we made the best decision possible.
Choose the product or service you wish to offer, and then develop a decoy plan. First, check to see whether your clients like it already. Also, make sure the product or service is superior in terms of benefits and pricing to the competition’s products.
Then, make a decoy. To improve the attractiveness of the product you picked, make the third choice (the decoy) asymmetrically dominated by the product you selected. At least three are required (more offers will cause decision paralysis).
Consider how the decoy should be priced. Choose a similar or somewhat lower price for the decoy than your crucial product. Also, make sure that the decoy doesn’t provide as much value as your chosen product.
Thus, it will be slightly less expensive while providing significantly less value, drawing customers’ attention to your more valuable option with the most value.
The decoy effect is the term for a situation where adding an asymmetrically dominated product or service to your array of choices can subtly bias consumers’ judgments and decisions over time.
This article took you through the psychology behind the decoy effect and present ways for products and services providers to use this knowledge and strategically employ it in their marketing and advertising.