The Decoy Effect, also known as the Asymmetric Dominance Effect, is a phenomenon in consumer behavior and decision-making where the presence of a third option (the decoy) can influence the choice between two other options.
The decoy is designed to make one of the original options (the target) more attractive by comparison.1
Visual Representation:
How It Works
When consumers are presented with two choices, they may find it challenging to decide between them.
However, introducing a third, less attractive option (the decoy) can shift preferences toward the target option.
The decoy is typically similar but inferior to one of the original choices, making the target option appear more desirable.2
Example
Imagine you are choosing between two subscription plans:
- Plan A: $10 per month for 10 features
- Plan B: $15 per month for 20 features
The decision might be tough for some consumers.
Now, consider introducing a third option:
- Plan C: $14 per month for 15 features
Plan C is more expensive than Plan A but offers fewer features than Plan B.
Its presence makes Plan B look like a much better deal in comparison, thereby increasing the likelihood that consumers will choose Plan B.
Applications
The decoy effect is used in marketing and pricing to guide consumers toward a more profitable or preferred choice.
It’s commonly used in retail, subscription services, and technology products.3
Implications
Understanding the decoy effect helps consumers recognize when they’re being influenced by irrelevant options, leading to more informed decisions.
For businesses, using the decoy effect can boost sales and improve product positioning.
By being aware of the decoy effect, consumers and businesses can better navigate choices and preferences.4
Related Terms
References:
1. Wikimedia Foundation. (2023, July 24). Decoy effect. Wikipedia. https://en.wikipedia.org/wiki/Decoy_effect
2. Trueblood, J. S., & Pettibone, J. C. (2017). The phantom decoy effect in perceptual decision making. Journal of Behavioral Decision Making, 30(2), 157-167. https://onlinelibrary.wiley.com/doi/abs/10.1002/bdm.1930
3. Positioning decoy pricing to shape how customers perceive value. Commercial Growth Consulting. (2024, April 17). https://www.simon-kucher.com/en/insights/positioning-decoy-pricing-shape-how-customers-perceive-value
4. What is the decoy effect, and how to use it. Price Intelligence & Competitor Monitor Software. (n.d.). https://www.minderest.com/blog/what-is-decoy-effect
