Latest / Marketing Psychology with Fexingo: Behavioral Triggers, Persuasion, and Consumer Behavior / The Decoy Effect How a Third Option Steers Your Choice
Transcript
- Lucas: You walk into a movie theater. Small popcorn is $4. Large is $7. Nobody buys the small. But you notice there's also a medium for $6.50 — which suddenly makes the large look like a steal. Luna: Right — you'd probably never buy the medium, but its presence changes your perception of the large. Lucas: Exactly. That's the decoy effect, also called asymmetric dominance. It's when a third option is introduced that's deliberately less attractive, making one of the other two seem like the obvious rational choice. And it's everywhere once you start looking. Luna: So before we dive into more examples — it's worth saying that if these marketing conversations have sparked something you've actually used, listener support is what keeps this show going. It's ad-free, and that matters to us. If you want to help, you can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah — and we really appreciate that. So back to the decoy. The classic academic example comes from a study by Dan Ariely. The Economist ran a now-famous subscription offer: web-only for $59, print-only for $125, or print plus web for $125. The print-only option was a decoy — nobody in their right mind would pick it, but it made the combo look fantastic. Luna: And when the decoy was removed, more people chose the cheaper web-only option. The decoy literally shifted preferences. Lucas: Yes. In the experiment, 84 percent chose the web-only when the print-only decoy was absent. Add the decoy back, and 72 percent went for the $125 combo. That's a massive swing from pricing architecture alone. Luna: So the decoy doesn't have to be a product you expect anyone to buy. It just has to be dominated by the target option — worse on some key dimension, like price for the same features. Lucas: Right. The dominated option creates a contrast. You see the decoy, compare it to the target, and the target wins on value. Meanwhile, the other good option — the cheap one — looks less appealing because it's not being directly compared to the decoy. Luna: Let's talk about where we see this in practice beyond The Economist. I think of SaaS pricing tiers all the time. Lucas: Absolutely. Take a project management tool like Asana or Monday.com. They often have a basic tier, a premium tier, and a business tier. But sometimes the business tier is priced just slightly above premium, with only one extra feature that most teams don't need. Its real job is to make the premium tier look like the smart choice. Luna: And if the business tier were removed, would more people drop down to basic? Lucas: Probably, yes. Because the decoy anchors your perception of what's fair. Without it, you're comparing basic to premium directly — and basic might look pretty good. But with a high-priced decoy, premium feels like you're getting a deal. Luna: Another place: fast-food combos. You see a small fries for $2, a medium for $3, and a large for $3.50. The medium is the decoy — it's only fifty cents less than the large, but the large gives you way more. So you 'upgrade.' Lucas: That's a textbook application. And the decoy doesn't have to be the middle option. Sometimes it's the premium option that makes the mid-tier look reasonable. It's all about the relative positioning. Luna: So how do you spot a decoy if you're a consumer trying not to be nudged? Lucas: Look for an option that seems obviously worse on some dimension compared to another. If you see a subscription that costs the same as a more feature-rich one, that's a decoy. If a menu item is priced almost the same as a larger portion, that's a decoy. Then ask yourself: what would I choose if that option weren't there? Luna: That's a good mental trick. Because often the decoy's only job is to make you feel smart for picking the more expensive option. Lucas: And it works because we want to justify our decisions. Picking the large feels like a rational choice when you can say, 'Well, the medium was a rip-off.' The decoy gives us a narrative. Luna: Is there a line between ethical pricing and manipulation here? Lucas: I think it depends on whether the product you're being nudged toward actually delivers more value. If the large popcorn is genuinely a better deal per ounce, and you want a large, that's fine. The problem is when the decoy is used to sell something that's actually worse for the consumer — like a subscription tier with features you'll never use. Luna: So the decoy is a tool. It's not inherently evil, but it can be used to exploit. Lucas: Exactly. And being aware of it is the first step. I think marketers should use it responsibly — to help customers see value, not to trick them. Luna: Let's bring it back to a concrete takeaway. If you're a marketer listening, how do you design an effective decoy? Lucas: First, identify the target option — the one you want to sell most. Then create a decoy that is clearly worse in one dimension but similar in price or features. The decoy should be dominated by the target on at least one attribute, and comparable on others. And make sure the other option — the cheap one — is not directly comparable to the decoy. Luna: So if your target is the mid-tier subscription, the decoy might be a high-tier that's only slightly better but much more expensive. Lucas: Yes. And test it. Because decoys don't always work — it depends on how your customers perceive value. But when they do work, the effect is powerful. Luna: I want to mention one more example: car models. A base model, a mid-level trim, and a fully loaded one. Often the loaded one is so expensive that the mid-level seems reasonable, even if it's still expensive. Lucas: Right. And dealers will sometimes show you a stripped-down version first to make the mid-level look better. It's the same principle. Luna: So next time you're choosing between three options, ask yourself: is one of these a decoy? Lucas: And if you find one, you might just save yourself some money — or at least understand why you're reaching for the large popcorn.