Imagine this …
The sequel to one of your favorite movies just came out in theatres.
You’re lucky enough to snag tickets and invite a few friends to come along.
When you walk in the door of the theatre you’re greeted by the buttery aroma of freshly popped popcorn.
You’re not particularly hungry but it’s been ages since you’ve been to the movies so you decide to treat yourself.
Normally you’d get a medium popcorn, but you can get a large one for only $0.50 more, which seems like a great deal compared to the others.
What do you do? Do you stick with a medium popcorn as planned or go for the large?
In today’s edition of Why We Buy we’re exploring The Decoy Effect—why presenting buyers with a third option that you don’t actually expect them to buy can make it easier for them to choose.
Let’s get into it.
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The Psychology of the Decoy Effect 🧠
In marketing, The Decoy Effect is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option. The “decoy” choice is strategically priced to make one of the other options much more attractive, like in the popcorn example above.
Creating a decoy option is a common way businesses help consumers to overcome choice paralysis and nudge them into spending more.
Inside Your Buyer’s Mind🧐
Making decisions is hard. It requires System 2 thinking (aka. the slower, more analytical mode of thinking), which leads buyers to look for shortcuts to help them decide.
When presented with two options that are both equally attractive for different reasons, buyers often struggle to choose. Rather than comparing the pros and cons of each option, consumers tend to simplify the process by selecting only a couple of criteria (say price and quantity) to determine the best value for money.
By introducing a third option—a “decoy” option—you can actually destress the decision-making process.
How To Apply This 🤑
Alright, so how can we apply this right now to sell more?
Understand your buyer’s context
You may think that offering a variety of highly differentiated products means you have something for everyone, but it may actually make it harder for buyers to decide. If you don’t know why customers would choose one product over another, you should talk to them to better understand the context of their situation.
As Bob Moesta says, context creates value but contrast creates meaning. Buyers may not know what they want, but they usually know what they don’t want, which helps speed decision-making.
Use decoys to upsell
Create a decoy option that nudges buyers to spend a bit more. This option should only be used if the more expensive option really is better value for the customer.
Use decoys strategically
Perhaps you offer solutions that your customers love, but that aren’t as profitable for your business. Rather than removing the product entirely, you can add a decoy option to help sway buyers towards choosing your more profitable products.
For example, we offer two very different research services at Customer Camp—a Mini Research Sprint and a Custom Research Sprint. The Custom Research Sprint is extremely valuable to our clients and we love doing it, but it’s also very time-intensive for our small team. Rather than removing this service entirely, we added our Clarity Call Cheatsheets to our Hire A Researchers page as a third option. Offering two lower-priced options next to our premium service helps steer more buyers towards our more profitable offers.
The Short of It 💥
Expensiveness is a relative notion. Creating a high-priced decoy product can make other products look reasonably priced in comparison, while decoys can also be used strategically to encourage customers to spend more.
Decoy offers shouldn’t be used to manipulate buyers. They should be used to reduce analysis paralysis and sway buyers towards the best choice for them.
Until next time, happy selling!
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