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The Decoy Effect

posted 2 years ago by damocci (1514)
30 replies | jump to latest

There's a chance that you haven't HEARD of it, but you've definitely seen it, and have almost certainty fallen victim to it. You've noticed that there's something senseless about the way products and services are priced, but perhaps didn't know the term or why all manner of businesses price things this way. Introducing The Decoy Effect:

So you go to the movies with your date, and on your way to the theater, you stop at the concessions bar to pick up a tub of popcorn. Lets say you see only two options: a small bag for $3 or a large tub for $7. Which one do you choose?

More often than not, you'll choose the small option for $3. You'll reason to yourself that popcorn is not healthy anyways with the butter in it, so let's get the smaller one; plus it's more than 50% cheaper. $7 feels like a huge rip-off, especially for such an unhealthy snack.

But what if we were given another option...? A medium for $6.50

This suddenly changes everything. You ignore all the health and financial reasoning behind not buying the $7 option that you had earlier. You'd say: “For only 50 cents, I get a large over a medium!” And all of a sudden $7 provides you a great value. Bam!, you're sold

This is the Decoy Effect and you just fell victim to one of the very popular marketing ploys in the world. Small businesses to large companies, all of them use decoys in their pricing to alter your decision making in order for you to spend more. Some more examples:

iPhone Ludicrous 16GB: $1000
iPhone Ludicrous 32GB: $1800
iPhone Ludicrous 64GB: $2000

Big Mac: $10
Big Mac + Coke: $14
Big Mac + Coke + Chips: $15

NY Times 1 Month Subscription: $3
NY Times 3 Month Subscription: $9
NY Times 12 Month Subscription: $20

What are your thoughts on this? Have heard about this Decoy Effect before or noticed it? Is it ethical? Is it fair game because "we are adults and should be able to make logical/informed spending decisions?" Does it expose a form of profiteering (ie. how can it cost $800 to double the storage on an iPhone Ludicrous to 32GB, yet it's only $200 to double that to 64GB)? Or maybe you're indifferent? Does knowing about this make you want to think twice about your future purchases?

[–] Otter (24464) 2 years ago

That's why some expensive restaurants have really insane items on their menus, like "Thousand dollar burgers", which are all tarted up with black truffles and gold leaf and other expensive crap.

Nobody ever orders those items, they're there to make the second, third, and fourth most expensive items look reasonably priced by comparison.