The Decoy Effect
By Josephine Sticha
The decoy effect is a cognitive bias that you can use in product pricing, in finance and even in politics in order to influence people’s decision making. The decoy effect is a phenomenon whereby consumers will tend to have a specific change in preferences between two options when also presented a third option that is asymmetrically dominated. In simple words, when there are only two options, consumers will tend to make decisions according to their personal preferences, but when consumers are offered a third strategical decoy option, they will be more likely to choose the more expensive or the better deal between the two original options. How does the decoy effect influence consumers to purchase a certain target product?
In 2013, researchers, Ricardo Sellers-Rubio and Juan-Luis Nicolau-Gonzalbez, wanted to test the decoy effect in the scheme of sales promotions, to see how the decoy effect is influenced by the presence or absence of a store brand product. They randomly assigned their participants into three separate groups and told them to choose between two, three or four different chicken broth brand options. One of those options was a decoy which would be placed on sale during certain experiments. The result of their first experiment confirms the effectiveness of the promotion which had increased sales. The demand for the target product was higher when the decoy was present rather than when it was absent (Sellers-Rubio & Nicolau-Gonzalbez, 2015). Their second experiment results confirmed that the promotion was effective in increasing sales as consumers did not disregard the opportunity to obtain 10% more product, which ultimately changed their preference to a different alternative. Their final experiment was to test the decoy in the presence of the store brand and the national brand. The results confirm the presence of a decoy effect raises the demand for the target product. The results of Sellers-Rubio and Nicolau-Gonzalbez’s study state that if a decoy is present when a promotion is held in stores, the effectiveness of the promotion is even higher than without a decoy. Their research also suggests that store brand consumers are more likely to change their selection in order to benefit from the promotion than national brand consumers (Sellers-Rubio & Nicolau-Gonzalbez, 2015).
The decoy effect is relevant in psychology and marketing strategies because it challenges our minds to make complex decisions. Shopping can be very stressful at times, so consumers attempt to reduce their anxiety by selecting a couple criteria (price and quantity) to determine the best bang for their buck (Mortimer, 2019). A decoy is not intended to sell a specific product, but rather nudge consumers in the right direction towards the target while still making you feel like you’re making a rational decision. The pre-frontal cortex of the brain is responsible for our decision making processes. Connections and messages are sent from the prefrontal cortex to other areas of the brain that contemplate different options (Bohren, 2019). Making a decision is hard when there are too many alternatives that you have to weigh the options for before making a final decision. And there is always the possibility of making a bad decision and having to take a risk because of it. For instance, imagine you are looking to purchase an new blender. There are two options to choose from; the cheaper one, priced at $98 that promotes 900 watt of power and a two-piece accessory kit, and the more expensive one, priced at $155 with 1,200 watts of power and a seven-piece accessory kit. On your initial assessment of the two products, the more expensive blender would give you more value for your money, however, there is a third option. This blender is priced at only $125 with 1000 watts of power and a five-piece accessory kit (Bohren, 2019). This option makes it look like a good deal when compared to the cheaper blender, but when compared to the expensive option, it looks like a bargain! You get more power and more accessories for only 30 dollars more.
The decoy effect is a scientifically proven method that can be used in most business marketing and product plans. Not only does the decoy effect increase the sales of target products, which is good for business, but it also makes life easier for consumers to make a decision and helps them come to terms with the decision they’ve made rather than feeling as though they have taken a big risk. The next time you are shopping at the store and come across similar products with very different value, remember that the better deal (typically the decoy) is there to help aid you in your decision making, not to make it more challenging.
Bohren, A. (2019, October 28). Decision Making Process: Complete guide. Retrieved from https://blog.cognifit.com/decision-making-process/
Mortimer, G. (2019, October 27). The decoy effect: how you are influenced to choose without really knowing it. Retrieved from https://theconversation.com/the-decoy- effect-how-you-are-influenced-to-choose-without-really-knowing-it-111259
Sellers-Rubio, R., & Nicolau-Gonzalbez, J.-L. (2015). Testing the decoy effect in the presence of store brands. International Journal of Retail & Distribution Management, 43(2), 113–125. doi: 10.1108/ijrdm-07-2013-0144