DECOY EFFECT How Adding a Third Option Guides Customers to Choose

Today's bite is how adding a third option guides customers to make a specific choice.

Did you know that when our customers are presented with two options, they have a hard time determining their value? However, adding a third option helps guide them to a specific choice.

WHY?

It's called the Decoy Effect, whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated.”

The decoy is priced to make one of the other options much more attractive. It is “dominated” in terms of perceived value (quantity, quality, extra features).

Images - Decoy Effect

In this example, the medium-sized popcorn priced at $6.00 is placed in the middle to nudge customers to purchase the large. "Only 50c more!"

The decoy is not intended to sell. Its job is to nudge consumers away from the “competitor” and towards the “target” — usually the more expensive or profitable option.

How You Can Use It

Think about your customers, what you offer, and how you could nudge them to choose another option. Here are some examples: A more expensive product or service, workshop, course, book, subscription plan... the list goes on.

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