There are general patterns in user behavior and decision-making when shopping online. The search for this common denominator between the neurosciences of e-commerce and marketing is one of the keys for companies, which choose to implement techniques such as the decoy effect to increase sales. In this article we will explain what is the decoy effect and how can you apply it in your e-commerce. Keep reading!
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What is the decoy effect?
The decoy effect is a pricing strategy used by companies to trick consumers into switching from one option to another that is more expensive or more profitable for the company. They do this by adding a lure that influences our decision-making ability without our realizing it.
Although it is generally used in prices, it is not used only in this field. For example, it may affect how we choose a flight, a drink or the like.
Marketers call the lure effect the “asymmetrical dominance effect”. They call it that because it’s a phenomenon where consumers can signal a change in preference when presented with a third option (in addition to the two options they had) creating asymmetric dominance. to new stimuli.
On which products can it be applied?
We already know what the lure effect is, but on which products can it be applied? This strategy is effective for selling very similar products but with slightly different characteristics. It can be quality, process or quantity.
Service companies can also use this technique, especially if they go online with subscriptions or acquire space in the cloud.
A clear example is Spotify. Spotify offers:
- Individual subscription at €9.99
- Duo package for two people at €12.99
- Family package for six people at €15.99
The small difference in price compared to the service offered will tempt most couples to opt for the family plan, even if they don’t need it.
This formula is also widely used in online newspapers and magazines.
How does the lure effect work?
It is often thought that more options mean easier decisions. But it’s not like that. In reality, we are overwhelmed when we have too many alternatives because we fear making the wrong decision. As a result, making a decision becomes more difficult.
The main problem is uncertainty. There are several factors that we usually consider when making a decision. The less certain one is of which ones to favor, the more difficult it is to choose. This is why we often only consider a few criteria (such as price and quantity) to determine what is the best investment.
According to various studies, we tend to be more averse to poor quality than higher prices. This is where the figure of the decoy comes into play. This technique exploits this human propensity and pushes us to opt for an option that is both better and more expensive. It makes us feel that we are making a rational decision.
In fact, we don’t even realize that lures have some impact on our choices. Whatever we ultimately choose, we believe we do independently.
How to apply the decoy effect in your ecommerce
Here are some best practices to take advantage of it:
1# Start with three options
One of the keys to the decoy effect is having three options. Although it can be done with more, it is the ideal starting point where one can think clearly about the target, the competition, the lure and how to present it in its various forms.
2# Make clear comparisons
It is important not to overwhelm the customer with things to compare. The easier it is to compare options and qualities, the better.
Most of the time one of those qualities will be the price, which is simple. The other can be more complicated, depending on what you’re selling. If the product has one main feature that you can highlight, that makes things easier. Otherwise, you’ll have to try to find ways to categorize features. These groupings will make it easier to compare a single aspect against multiple features.
3# Group in packs
In case you don’t have different tiers of individual products or services, you can take advantage of bundling to add value and create lures in a more artificial way.
4# Create price tables
A common denominator of lures is to present information in price charts. First, you provide a structure to present the key aspects we want to communicate. Second, we not only make it easy to compare, but also highlight the preferred option that we want our customers to select.
People often don’t know what they want, so providing benchmarks helps them make decisions.
Examples of decoy effect
Finally, let’s look at some of the most well-known examples of the decoy effect:
The price of popcorn at the cinema. The question is, why do we always end up buying the big bucket of popcorn? We will see it. In the case of popcorn, there are two dimensions we compare: size and price.
Small, medium and large. They make sense, but when we use them to analyze prices, the most common choice is to go for the bigger one. Let’s walk through this thought process:
- The small is $4 and compared to the medium at $6.50, it makes sense. More popcorn equals a higher prize.
- The medium is $6.50, but compared to the large at $7.00, that seems like a mistake. We’ll have a lot more popcorn for just 50 cents more. This instantly removes the middle option.
- Now the choices are the small versus the big, but since it’s hard to make an obvious comparison here, we’re going with the one we can rationalize, choosing the big ones.
One of the best-known experiments was that conducted by Dan Ariely, professor of psychology and economics at Duke University, when he applied these principles to buying subscriptions for The Economist.
In a study of 100 college students, he asked them to choose a subscription to The Economist from three options:
- Web only for $59
- Print only for $125
- Print + Web for $125
The result? Of the 100 students, 84 chose Print + Web, 16 chose Web only, and none chose Print only. If we categorize each option according to the aforementioned theoretical framework, Print + Web is the objective (A), Web is the competition (B) and Print is the decoy (A-). Sure enough, when Ariely wanted to know why bother with the lure if no one had chosen it, she tried again in the studio.
This time, he asked 100 other students to choose between the Print + Web and Web only options. The results changed dramatically, with 32 of them choosing Print + Web, while 68 chose Web only.
Did you know that IKEA offers a range of specific products that serve as decoys? They range from beds, chairs and bedside tables to chests of drawers. For example, there is a specific dresser that the company really wants to push for a high profit margin. And then there are those who are not made to sell. This is the case of KULLEN and MALM products.
On the one hand, KULLEN is a low-margin product that IKEA does not intend to sell. It’s similar in design to the MALM on the right, except it’s smaller, made of lower quality wood, and has fewer drawers that don’t open as easily.
In stores, the KULLEN at €39.99 is presented right next to the more expensive MALM at €59.90. But that doesn’t matter, because it has a much higher value. Customers can see it with their own eyes. KULLEN is not a waste of resources because it changes the decision-making context and inclines people towards the most profitable option for the business. It works because customers don’t know how much the products should cost.
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