How does the Decoy effect swindle you away?

When we are choosing between two options, the decoy effect describes how the addition of a third, less appealing option (the decoy) can influence our perception of the original two options. Decoys are "asymmetrically dominated" in the sense that they are completely inferior to one option (the target) but only marginally inferior to the other (the competitor). As a result, the decoy effect is also known as the "asymmetric dominance effect."

 

The asymmetrical dominance effect is another name for the decoy effect. When a third, more dominant option is introduced, people choose between two options, which is considered a cognitive bias.

 

The decoy effect occurs when a customer is given a third option that they are more likely to choose. This option is the most expensive of the three.

 

What is the Decoy Effect? 

 

The decoy effect (also known as the asymmetrical dominance effect) is a cognitive bias that occurs when people change their preference between two options in response to the presentation of a third, asymmetrically dominated option. To put it another way, when there is a third important option (the decoy), a consumer is more likely to select the more expensive of the first two options.

 

The decoy effect can lead to us spending and consuming more than we need. When a decoy option is present, we tend to make decisions based on what feels like the most advantageous choice rather than which option will best suit our purposes.

 

Unfortunately, following our intuition does not always imply that we are making the best decision. Most of the time, the decoy effect causes us to choose a more expensive option than we would have otherwise.

 

Businesses and corporations frequently use decoys to "nudge" us into purchasing more than we really need. This can have a significant impact on our finances as well as our health over time. Many products commonly marketed with decoys are unhealthy foods, such as soft drinks, and excessive consumption can have serious health consequences. Sugary beverages, in particular, have been linked to an increased risk of type 2 diabetes, heart disease, and other chronic conditions; however, they are far from the only product that frequently employs decoys to upsell larger portion sizes.

 

When used strategically by marketers, the decoy effect is the addition of a third less appealing option between two original choices. Decoys are far inferior to the first option, the target, and only marginally inferior to the second option, the competitor.

 

Also Read | 5 Factors Influencing Consumer Behavior 

 

 

How does the Decoy Effect Work? 

 

Consumers, according to psychologist Barry Schwartz, experience choice paradoxes when presented with too many options. Choice overload impedes decision-making by increasing consumer anxiety.

 

When confronted with an abundance of options, consumers tend to simplify the process by focusing on specific criteria such as quantity and price to make a final decision. Marketers use the decoy strategically when consumers are faced with a choice paradox and are attempting to mentally simplify the process. The decoy manipulates the decision-making process by drawing consumers' attention to the target option.

 

As a result, a decoy is a type of nudging. The pioneers of nudge theory, Richard Thaler and Cass Sunstein define it as "any aspect of choice architecture that alters people's behavior in a predictable way without forbidding any options."

 

Decoys help to de-stress the decision-making process and alleviate our anxiety about having a variety of options to choose from.

 

Another psychological principle is the 'paradox of choice,' which describes how people struggle to make decisions and become overwhelmed when presented with too many options.

 

This is due to preference uncertainty. We make decisions based on personal factors in any given situation. However, the less certain we are about those factors, the more difficult it is to make a decision.

 

As a result, when deciding between products, people typically focus on only a few factors, such as price and quantity. The decoy effect takes advantage of this by manipulating those variables.

 

Furthermore, the decoy effect exploits another psychological principle: loss aversion. People dislike losing more than we enjoy winning. Finding $10 on the street may temporarily improve your mood, but losing $10 may ruin your entire day.

 

However, we do not define losses in absolute terms. They are defined in relation to something else. And this is how the decoy effect can have a strong influence on behavior. Decoys work in part by changing our frame of reference. The next best option is better in some ways and worse in others when compared to the decoy. However, loss aversion causes us to consider the disadvantages more when making a decision. As a result, when compared to the decoy, we tend to select the next best product.

 

Furthermore, people are more averse to poor quality than they are to higher prices. Good decoys are intended to promote something of higher quality and cost.

 

 

Examples of Decoy Effect

 

We discussed the Decoy Effect and why it is important.

 

It's time to see some real-world examples of how companies use the decoy effect to favor the preference of the product they want to sell by flanking it between two other products of lesser importance to the company.

 

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Examples of Decoy Effect 

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1. Smartphones:

 

If you're thinking about buying an iPhone 8, the existence of the iPhone X makes you more likely to buy the iPhone 8 Plus—even if you'd never buy the iPhone X in the first place. Apple has raised the average price paid for any iPhone from $694 to $796 simply by adding a more expensive decoy—not by introducing a more expensive model, but by making the previous most expensive model the new midpoint.

 

Here's something that will definitely make you think twice about purchasing an iPod touch. If you want to increase the storage capacity from 16GB to 32GB, you must pay an additional $70 and receive additional features such as a 5MP iSight camera and iPod Touch Loop.

 

However, if you want to increase the capacity from 32GB to 64GB, you must pay an additional $100 and receive no additional features. It's almost a given that the 32GB iPod Touch is the most popular model. You may conclude that the 32GB version represents the best value for money. Only a few would purchase the 16GB model, and even fewer would purchase the 64GB model.

 

Also Read | How Apple uses AI in Big Data 

 

2. Politics :

 

A decoy can also influence your perceptions of political figures.

 

You may not have liked George W. Bush while he was president. But now that Donald Trump is president, you probably like Bush even more. In either case, you despise Donald Trump. That's because Trump is a sham. Adding Donald Trump to the mix will not change your opinion of either Obama or Trump, but it may shift—or even reverse—your opinion of Bush.

 

This is supported by polling data. Since Trump took office, Bush's approval rating has steadily risen. Even Democrats are beginning to like Bush. 

 

 

3. Airlines:

 

It's likely that the next time you book a ticket, you'll be presented with a menu of options.

 

Many people, including popular airline blogger Brett Snyder, have chastised United for marketing Basic Economy as the cheapest option when, in fact, after baggage fees and seat reservations, customers frequently pay more than a regular economy ticket.

 

While this is a valid criticism, it overlooks the point of United's pricing strategy. Basic Economy exists, in part, to shift the choice architecture from deciding whether to buy a ticket to deciding between three tickets: an obviously inferior one, a far more sensible one, and a far more sensible one. Basic Economy aids in the sale of Economy tickets.

 

 

4. The Economic Times:

 

The Decoy Effect phenomenon is a concept from economic books, and no one knows it better than The Economist, a widely read magazine. The publication cleverly designs the pricing of its print and digital subscriptions, making the combination appear to be the best deal available. Here's how they charge for their subscription:

 

• $59 for a web subscription

• $125 for a print subscription

• $125 for a web and print subscription

 

The first offer of $59 appeared to be reasonable. The second option (only print) appeared to be slightly more expensive, but still acceptable. But what about the third possibility? For the same price as a print-only subscription, why not get both?

 

 

How to avoid the Decoy Effect? 

 

Simply being aware of the decoy effect's existence is insufficient to prevent it. Marketers have so expertly disguised the decoy effect that it appears natural for a consumer to be drawn to it. There are, however, a few ways to avoid becoming enamored with charisma asymmetric dominance.

 

 

1. Purchase only what you require.

 

When you think about it, the decoy effect isn't all that bad. Sometimes going with a larger size or a higher-quality version of a product is exactly what you need. However, it is equally important to consider what you truly require.

 

It is always beneficial to concentrate on the reason for purchasing something. Consider whether you require a larger/more expensive/higher-quality variant of a product. Answering these questions can greatly assist you in making your final decision.

 

 

2. Keep an eye out for three-piece sets.

 

When you're out shopping or considering a political candidate, keep an eye out for three options. When there are only three options: target, competitor, and decoy, the decoy effect is most powerful.

 

A recent study with over 600 participants discovered that people who relied heavily on their instincts were the most influenced by the decoy effect. While using your intuition has its advantages, logical reasoning can often be helpful when making a final decision.

 

 

3. Plan ahead of time what you will require.

 

We are easy prey for the decoy effect because we don't know what we really need or what factors must be considered when making a decision. So, when you sit down to consider your options, taking time to figure out exactly what you require may be a good idea.

 

It can be concluded that the decoy effect, also known as the attraction effect, is a widely used tool by marketers all over the world. While the decoy effect has its advantages, from the consumer's perspective, it mostly works in favor of the companies that use the strategy. So think long and hard before going to that store near you!

 

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