Decoy Effect: Price Psychology Trick That Hypnotizes Your BuyersDigital Marketing
Because this marketing strategy has the ability to hypnotize your buyers. When you successfully execute it well, your sales can increase many times over.
What is the Decoy Effect in a Marketing Strategy?
The Decoy Effect is a price psychology trick where a consumer tends to switch between two options when given an unbalanced third option. These choices make one price unreasonable, while one looks very profitable.
In fact, this is a price game that aims to direct your buyers to a higher-priced product option. In marketing psychology, the Decoy effect is also known as the attraction effect or asymmetric dominance effect, which is known to be effective in boosting sales.
How the Decoy Effect Works
To make it easier, we can see directly from some examples of using the Decoy Effect.
For example, when you are watching at the cinema and want to buy popcorn. There will be prepared pretty SPG offering popcorn in several price options. Examples like this:
- Popcorn small: IDR 30,000
- Medium size popcorn IDR 50,000
With this option, most people will easily choose between small or medium sizes. Usually people will choose the small size of Rp. 30,000 because they feel it is more economical in their pocket.
This story can be different when SPG Cantik offers the following three price options for popcorn:
- Small: IDR 30,000
- Medium: IDR 50,000
- Large: IDR 55,000
People who choose the medium size will then be reminded, "The difference is only Rp. 5,000, don't just take the large size, sis to make it more economical?"
Here, you will be hooked to immediately change your choice because, "Yes, it will be very profitable to take a large size."
And even, by itself, people will choose the large option because they realize that mathematically they benefit.
From the sales side, this can increase sales because the tendency of people to choose products with higher prices becomes more significant.
We can compare sales before and after implementing the Decoy Effect in this image:
According to studies, the majority of customers will tend to choose a cheaper price option in a transaction. But by adding the third option, the product selection of the third option will jump sharply.
The third option is considered more profitable and gives more value. The effect can be seen, the purchase of a product with a large size that is larger makes the sales turnover increase by 52.79%.
Examples of Application of the Decoy Effect in Marketing
The big purpose of using the decoy effect is to get people to buy the bigger, much more lucrative price packages. The trick is to provide a third price option that is actually unattractive and unbalanced.
This third unattractive and unbalanced price tag will confuse your original choice with a tendency to go for the cheapest price. With this troublemaker, the effect is more efficient and profitable as if we can get more with this third option.
Whereas products whose value is reduced and become unattractive (such as medium or small in popcorn), this is what we call Decoy. Demand for this product has dropped dramatically in line with the increase in sales of products with these more attractive options.
To practice the Decoy Effect, here are some examples that you can copy:
1. Price variations with sizes
Examples of the Decoy Effect in price variations can be seen easily in the example of popcorn prices earlier.
So, business people deliberately design three types of prices with different sizes. One size small, medium and large. Medium size is designed to give a decoy effect with an unattractive price concept compared to large size because the price difference is thin.
- Small for IDR 30,000
- Medium for IDR 55,000
- Big for Rp. 60,000
This pricing makes large-sized products more desirable because they offer better value to potential buyers.
Examples of businesses that often use the decoy effect concept include Starbuck, Popcorn, Jco, and so on. Apart from the F&B industry, smartphone products also often play this price psychological trick by comparing the prices and storage sizes offered.
Try to remember carefully, are you often influenced by this price determination? Yes, congratulations on being the one caught in the decoy effect! 🙂
2. Pricing package with features in it
We often see price packages with feature offers in digital products. Unlike the concept of size which aims to up selling to the highest price, the decoy effect concept can be done by:
Offering a third price that is less attractive and difficult for buyers to reach.
Direct buyers to a middle price that is both reasonable and benefits both buyers and sellers.
For example, as did Filmora with the following price concepts:
- Annual Plan US $ 39.99
- Lifetime Plan US $ 69.99
- Bundle Annual Plan US $ 99.87
There is a price of $ 39.99 but every year you have to pay, while the features are not very complete, or $ 69.99 with full features and a one-time fee?
Can you guess which one was chosen the most?
Examples of businesses that use this feature the most include hosting, email marketing providers, and other digital services.
3. Price Bundling Option
The price bundling concept is not much different from the size concept earlier. Simply put, we can provide wholesale prices for those who buy in larger quantities.
- Theme price for 1 domain is $ 35
- Theme Bundle for 2 domains $ 56
- Theme Bundle for 5 domains $ 65
Although it is not certain that you will use it for 5 domains or even if you do not necessarily have that many domains, you most likely choose the number three price plan, right?
The same is true when you purchase wholesale prices for physical products. The price of 3 pcs or 5pcs packages you often take because they are attractive and profitable, even though you don't really need all the products.
It's strange, but this is what the Decoy Effect actually does.
Decoy Effect Increases Sales by More than 60%
People tend to have difficulty making choices and have to think hard when there are only two choices. Actually this can be easier because people tend to choose the cheapest price.
But what's in it for you? If you could lead the customer to choose the best price option in terms of sales, wouldn't that be better?
Basically, humans do not choose based on absolute decisions. We tend to make choices based on the choices available and considerations of benefits.
This is why the decoy effect can increase the chances by up to 66% to direct the buyer to the available options.
There are two internet package options that are sold as follows:
- Family (20 GB): IDR 125,000
- Combo (50 GB): IDR 250,000
The odds of people choosing both packages are 50:50.
But compare if there are now 3 packages that are sold:
- Family (20 GB): IDR 125,000
- Combo (50 GB): IDR 250,000
- Combo extra (unlimited): IDR 275,000
Mathematically, the possible packages to choose would be 33:33:33. However, because the price of the combo package and extra combo turns out to be only a difference of IDR 25,000, then the opportunity for the extra combo option increases 2x or becomes 66%.
The same is true in the following similar cases:
Many customers have unwittingly become victims of the Decoy Effect strategy. What does it mean? That is, this strategy is really powerful and has a huge impact on your average selling point.
Psychological pricing tricks are an important marketing component to play with. When you apply it correctly, you can lead your customers to choose profitable product options.
The ultimate tips for implementing the Decoy Effect in your marketing strategy:
Do competitor research to see how competitors apply pricing psychology to their marketing.
Analyze your sales, before and after implementing this pricing strategy.
Try to be creative and think outside the box to create a variety of effective decoy effects for your business.
On the other hand, when we become consumers, you need to pay attention to this Decoy Effect and be careful. Do not let us have the intention to save money, but in the end we will be stumped by this price persuasion.