Picture this: you’re planning to buy a small popcorn at the movies. Then you see the medium is slightly cheaper than the large, so you grab the large “because it’s a better deal.” Moments later, you’re juggling a bucket bigger than your head, wondering how it happened. That’s the Decoy Effect at work!
What Is the Decoy Effect?
Also known as the attraction or asymmetric dominance effect, the Decoy Effect occurs when a third, less attractive option makes one of the other two choices seem far more appealing. Businesses from fast-food chains to subscription services use it to nudge us into spending more or switching to a profitable choice—often without our awareness.
How It Works
A “decoy” is designed to look inferior to one “target” product or service. When you compare the decoy and the target, the target appears like a smart upgrade—especially if the decoy’s price is close but offers fewer benefits. Studies show that adding a decoy can shift consumer preference between the remaining options by up to 40%, a massive swing in behavior.
Example of the Decoy Effect
- Popcorn Pricing: A small is $4, a large is $8, and the medium (the decoy) is $7.50. Suddenly, $8 feels like a bargain for twice the popcorn.
- Subscription Plans: The Economist once offered a print-only subscription at $125 and a print+digital subscription at the same $125, making print+digital look like the obvious winner.
Real-World Case Studies
National Geographic Popcorn Test
Moviegoers were offered two sizes. Most chose the cheaper, smaller size. But when an overpriced medium was added, more people upgraded to the large.
Apple’s iPod Pricing
Apple famously used three models—16GB, 32GB, and 64GB—where the 16GB and 64GB looked like “decoys” next to a perfectly priced middle option. Most customers gravitated to the 32GB.
IKEA Wardrobes
A low-quality, low-priced wardrobe (the decoy) often sits beside a slightly more expensive but clearly better “target,” making the target seem like incredible value.
Why Does It Happen?
Choice Overload
We look for shortcuts when faced with too many options. A decoy offers an easy “justification” to upgrade: “If I’m already paying $7.50 for a medium, why not get a large for just 50 cents more?”
Uncertainty
Unsure of how much an extra feature is worth, we default to the option that seems superior next to the decoy. Our brain loves finding a quick rationalization—and the decoy provides it on a platter.
Using the Decoy Effect in Business
- Pick a Target: Identify a higher-margin or feature-rich offering you want customers to choose.
- Add a Decoy: Price it close to the target but strip away a key feature (or two).
- Offer 3 Options: Keep it to three so the decoy stands out and highlights your target’s value.
Final Takeaway
The Decoy Effect is a powerful, often invisible tool that can dramatically shape our decisions. Whether you’re a consumer trying to save money or a business aiming to boost profits, recognizing it can help you shop smarter—or design offers that nudge people to pick exactly what you want them to choose.
