The decoy effect is a marketing phenomenon where consumers tend to change their preference between two options when presented with a third, less attractive option. This third option, known as the decoy, is strategically designed to make one of the original options seem more appealing by comparison.

For example: Imagine you’re at Starbucks and you’re deciding between two sizes of Caramelised macadamia oat latte: a small for €5.95 and a large for €7.40. Most people might choose the small because it’s cheaper and they don’t want too much to drink. Now, Starbucks introduces a medium size for €6.50. Suddenly, the large seems like a better deal compared to the medium, as you’re getting a lot more for just €0.95 extra. On the other hand, the small still seems like a reasonable choice if you don’t want to spend too much.

In this scenario, the medium size acts as the decoy. Its purpose is to make the large size seem more appealing by comparison, ultimately leading more customers to choose the large size and increasing Starbucks profits.

But does it work?

HELL YEAH… it’s working!

Some businesses see up to a 40% increase in preference for their products just by adding a decoy option.

What is the psychology behind it?
The psychology behind the decoy effect lies in how people make decisions when presented with multiple options. When people have choices, they compare them to find the best one. The decoy effect takes advantage of this by adding a third option that makes one of the original options look better. This third option is usually not as good as the others, so people ignore it. This makes them more likely to choose one of the original options, thinking it’s the best choice

If you want to implement the decoy effect in your business you can start by doing the following:

– Identify key products/services.
– Introduce a less attractive decoy option.
– Price the decoy strategically.
– Highlight benefits of main offering.
– Monitor, adjust, and optimize for better results.

Happy decoying!

Source: Kenthen dricks – Decoy Effect
Source: Dutch Starbucks Prices
Source: Smartiac