Tag Archives: Decoy effect in india

How companies make you change your buying preference: The Decoy effect


decoy

Do you think you have got a bargain by buying that large size when what you actually needed was the smaller size?

Well, you have been tricked. Need to know how?. Read on.

This is what is known as the ‘Decoy effect’ –Decoy effect is a phenomenon whereby the consumers have specific shift in the two options when they are presented with another option. 

It’s how marketers take advantage of comparison done by shoppers. When you have three options, the decoy effect makes something that’s not a bargain looks like a bargain.

Decoy effect is

  • a psychological technique
  • used extensively by companies in pricing

Marketing companies use it to

  • Take advantage of the loopholes in our brain
  • Push their product
  • Sell the product they really want to

The concept of decoys is closely related to “relativity”. Past research suggests that our brain works well when we are in a position to compare. There is often a conflict in the minds of the consumers regarding the choice of alternatives. Adding a third alternative which is superior to the competitor brand but not that of the target, increases the preference of the target brand. This third alternative is termed as ‘“Decoy”

relativity

For instance, in the above image in the circles in the middle are the same size, but appear bigger when placed within the smaller circles on the left, and smaller when placed within larger circles on the right

popcorn buckets 001

A classic example is of a popcorn cup that you buy while enjoying a movie in a cinema hall / theater.

Let’ say the price is something like this:-

Original prices (pre decoy)

Small Popcorn ……… Rs. 49

Large Popcorn ……… Rs. 119

What would you buy? . Mostly everyone will go for the Small popcorn considering the large one as expensive.

Now after employing decoy effect, a median size “medium” was introduced (its sole purpose being a tool for comparison – that is, a decoy)

Revised prices ( post decoy)

Small Popcorn ……… Rs. 49

Medium Popcorn ……… Rs. 109

Large Popcorn ……… Rs. 119

Now, which one will you buy?? Most people will NOW go for the Large popcorn!

Why? because it’s just 10 Rs.more than the Medium Popcorn and you are getting a LARGE one at that price.

iphone

Apple uses this strategy brilliantly to market it’s iPhone

  • 16 GB version of Apple iPhone 6 Plus ….Rs 62,500
  • 64 GB version of Apple iPhone 6 Plus ….Rs 71,500
  • 128 GB version of Apple iPhone 6 Plus ….Rs 80,500

Which iPhone will you buy??

It has been seen that the 128 GB iPhones have often been the first to sell out at launch. Some of that might reflect a genuine need for lots of media storage, but some of it reflects the decoy effect: people figure that the extra memory on the 128 GB model is a bargain, compared to the different between the 16 GB and 64 GB models.

In practice, I bet Apple is not paying anywhere near that amount for the extra storage — but it is successfully persuading more people to buy a Rs. 80,000 phone rather than a Rs 60,000,one.

Some of the places you will get to see this effect are-

1. Burger price at Mc Donald’s / Wrap prices at Faasos Rolls

2.  Any subscription plans eg:- Times magazine, Economist magazine, etc.

3. Online plan subscriptions eg:- Matrimonial sites ( Shaadi, Jeevansaathi, etc), e-learning sites

Now, having learnt all this and taken for a ride by the marketers ( all until now), can we overcome this decoy effect?

The decoy effect is pretty tough to get around, but it’s not impossible. Of course, your brain corrupts your shopping choices in all kinds of ways, so even if you beat out the decoy effect you’ll probably be taken advantage of elsewhere.

But as a smart shopper, you can definitely try.

First, focus on shopping per unit. In other words, convert everything to how much it costs per unit. If you’re buying a bag of chocolates, convert everything to the cost per chocolate.

If you’re buying a car, figure out the cost of the fuel efficiency and of each kilometer that you can expect to own the car.

Unfortunately, basing things entirely on price per unit still leaves you susceptible to the decoy effect. That’s why you also need to figure out, in advance, how many units you actually need. In other words, if you’re buying a bag of chocolates, how many chocolates will you actually need or eat ?

Using these two figures together – the cost per unit and the maximum number of units you need – you can asses correctly which item is the best buy for you. There can be lots of decoys on the market, but if you’re focused on maximizing the cost per unit up to the number of units you actually need, decoys won’t matter. You’ll always get the best bargain to suit your needs!