Suppose Shyam wants to buy a smartphone. He has narrowed down his choices to two smartphones, both of similar style, performance and brand, but differ in price and storage (GB). The cost of A with 250 GB is Rs 25,000, while the cost of B with 400 GB is Rs 40,000. He is in a dilemma about choosing between low cost and high storage capacity. But now a third option D has been added with 450 GB, which costs Rs 50,000.
Naturally, if Shyam is looking for storage capacity versus cost then it becomes easier to choose between B and D. This D is a decoy, which is deliberately planted by the company to increase the sales of B, whose margin is higher.
The decoy effect is a phenomenon that occurs when a consumer dramatically alters the preference for one option over another, when presented with a third option, similar but less attractive one. It's the "decoy" option, also referred to as the "attraction effect" or "asymmetric dominance effect."
Decoy pricing strategy is a clever marketing tactic used by marketers to boost the sales of a high profit earning item by influencing consumer decision-making behavior. The decoy option is deliberately made unattractive to consumers in order to influence their decision in favour of one of the other two when compared.
The decoy effect can be seen in a number of areas, including economics, pricing, marketing, and consumer choices like flights, online magazines, anti-virus subscriptions, soft drinks, icecreams or even potential romantic partners on dating apps. Mind you, decoys are everywhere.
The decoy effect can cause us to spend and consume more than we really plan or need. When a decoy option is present, we tend to make decisions based less on which option will best suit our purposes, and based more on what feels like the most advantageous or cost-effective choice.
It's really a mindgame played by marketers to trap us, and unfortunately, following our intuition doesn't always mean that we are making the smartest choice. Most of the time, the decoy effect leads us to pick a more expensive option than we would have otherwise.
But how and why does it happen? Decoys in fact serve to de-stress the decision making process in some way and ease the anxiety of having too many options to choose from. We do not realize we are being manipulated, rather we feel we are making the most logical choice.
So next time when you go for shopping, just see how you and your choices are influenced, psychologically.
--Kaushal Kishore
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