With rising competition, brands have become cunning in the way they lure their customers and one such strategy is called The Decoy Effect.
For example, if you want to buy an ice-cream and you’re presented with two options – a small one for Rs. 20 and a big one for Rs. 50. You will most probably go for the small option because of the huge gap in pricing. The decoy comes into work when another option of a medium sized ice-cream is offered for Rs. 45. Chances are that you will now go for the large option because it’s just Rs. 5 more than the medium option.
In the above instance, the medium sized ice-cream is a decoy and its sole purpose is to increase the sales of the large sized ice-cream. You may think you’re getting more bang for your buck but in fact, you’re getting tricked.
This is a widely used strategy in today’s era and brands like McDonalds, Apple and Starbucks have been using it effectively. You may get a burger for Rs. 120, but you’ll get a burger, a packet of French fries and a cold drink for Rs. 150. You’ll obviously invest in the latter option.
Similarly, Apple prices its products like earphones and battery chargers so outrageously that you’ll consider investing in a new MacBook altogether. In his book Predictably Irrational, behavioural economist Dan Ariely looked at the subscription models offered by The Economist magazine. They had a digital only subscription for $59, a print only subscription for $125 and a print plus digital subscription for $125. It was noticed that when all three options were offered, 84% of people opted for the combination deal.
On the other hand, when the print only subscription was scrapped, only 32% of people opted for the print plus digital combo. 68% of the people went for the digital only subscription. Initially, you might think the print only option is redundant, but when you study the decoy effect, it starts making sense.
The Urruda take
As consumers, it’s important for us to realize the meaning of this tactic and not be dissuaded by it. Whenever we have to make a purchase, we should think clearly about our needs and make an informed decision.