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Understand the "Decoy Effect"

Updated: Dec 23, 2023

Hey there,

Wherever you are we're hoping you're having/had an awesome day! Today we're going to delve briefly into the concept of the "Decoy Effect" in marketing. So let's break it down -

What's the Decoy Effect?

Imagine you're buying cake in a cafe. There are two options: a small slice for £3 and a big slice for £5. Most people looking to cut costs would go for the small right? Now, let’s say there’s a medium slice added for £4.50. It doesn’t seem like a great deal compared to the large cup. Suddenly, you might start to think...

“Hey, for £0.50p more, I can get a large!”

That’s the Decoy Effect. It's all about adding a third choice to make one of the original options look better.

How Can Your Business Use This?

  1. Pricing Products: Just like the coffee sizes, if you have products, think about how you price them. The trick is to price them in a way that nudges customers toward the choice that’s better for your business.

  2. Service Packages: Say you offer different service packages. You can set them up so one looks like the absolute best deal. People love feeling like they’re getting the most out of their money.

  3. Subscription Tiers: If you have subscriptions, use the Decoy Effect to steer customers to the tier you want them to pick.

  4. E-commerce Products: When listing products online, think about how their placement affects what customers choose.

Keeping It Real

When incorporating the Decoy Effect into your marketing strategies, it's crucial to tread carefully on the fine line between smart marketing and misleading tactics. Here's how you can keep it real and ensure your use of the Decoy Effect aligns with ethical marketing principles.

  1. First and foremost, every option you present to your customers should be genuine. Whether it's a product, a service package, or a subscription tier, ensure that each choice offers true value. Misleading customers might bring short-term gains, but it can damage trust and loyalty in the long run.

  2. The core of ethical marketing with the Decoy Effect is to create scenarios where the customer feels they are making the best decision for themselves. Your goal is to guide them, not manipulate them. If customers feel they're getting a good deal, they're more likely to have a positive view of your business and become repeat customers.

  3. Be honest in your descriptions and advertising. Avoid exaggerating the benefits of the more expensive option or downplaying the value of the cheaper one. Clear, straightforward communication about what each option offers helps build customer trust.

  4. While the Decoy Effect is a strategy to increase profits, it shouldn't come at the expense of customer satisfaction. The most successful businesses find a balance where they can guide customer choices while still leaving them feeling happy and satisfied with their purchase.

  5. When using the Decoy Effect for upselling, ensure that the higher-priced option genuinely offers something of additional value. If the jump in price is justified by significant extra benefits, customers are more likely to feel good about their choice.

  6. Remember, the ultimate goal is to build long-term relationships with your customers. This means focusing on their needs and ensuring they feel valued and respected in every interaction. Ethical use of the Decoy Effect can contribute to this by making customers feel empowered in their decision-making.

So, that’s the Decoy Effect!

It's like guiding your customers gently towards the choice you want them to make, but in a way that they feel happy about their decision. It’s not just about selling more; it’s about understanding what your customers want and creating a win-win situation. Give it a try and see how it can work for your business!

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