Latest / Marketing Psychology with Fexingo: Behavioral Triggers, Persuasion, and Consumer Behavior / How the Decoy Effect Steers Every Choice You Make
Transcript
- Lucas: You walk into a cinema. Small popcorn is $4.50, medium is $6.50, large is $7.00. Almost nobody buys the medium. That's not an accident—it's the decoy effect doing its job. Luna: So the medium isn't really a choice. It's just there to make the large look like a smarter deal? Lucas: Exactly. And the classic textbook example comes from a 1992 experiment by Amos Tversky and a young researcher named Dan Ariely. They gave people three subscription options for The Economist—web-only for $59, print-only for $125, or print plus web for $125. Luna: Wait—print-only and print plus web are the same price? That's the decoy. Nobody in their right mind would pick the print-only. Lucas: Right. And that's the whole point. In the experiment, when all three options were presented, 84% of people chose the print plus web bundle. Then they ran a second group and removed the print-only decoy. Just web-only for $59 and print plus web for $125. Suddenly, only 32% picked the bundle. The rest went for the cheaper web-only. Luna: So by adding an option nobody wants, you dramatically shift choice to the more expensive option. That's wild. Lucas: If these marketing conversations have sparked something you've actually used in your own work, that's exactly why we keep doing this show. Luna: Yeah, we deliberately don't run ads. No sponsors, no pre-rolls. The show exists because listeners find it useful. Lucas: If you want to support that choice, there's a link—buy me a coffee dot com slash fexingo. No pressure, just a way to keep it ad-free. Luna: And back to the decoy—because knowing it exists doesn't really immunize you, does it? Lucas: It doesn't. That's what makes it so powerful. The formal name is 'asymmetric dominance'—the decoy is dominated on price by the target, but it's not dominated on value in any obvious way. Your brain sees a clear winner and clicks without thinking. Luna: Where else do we see this? Airlines are a playground for decoys. Lucas: Absolutely. Take basic economy, economy, and premium economy. Basic economy is stripped down—no seat selection, no carry-on. That's the decoy. It makes regular economy feel like a good deal, even though it's still expensive. Delta and United have been refining this for years. Luna: And the decoy doesn't have to be a cheaper product. Sometimes the decoy is the super-premium version nobody buys. Lucas: Right. In pricing, it's called 'price anchoring' when the high-end option makes the mid-tier look reasonable. But the decoy effect specifically requires a third option that is asymmetrically dominated. For instance, a $2,000 mattress makes the $1,200 mattress seem affordable. But that only works if the $2,000 mattress is worse on some dimension—like fewer features. Luna: Or think about LinkedIn Premium. They have Premium Career at $29.99, Premium Business at $49.99, and Sales Navigator at $99.99. But the feature sets overlap in confusing ways. The decoy might be the least differentiated tier. Lucas: Exactly. And it's not just software. Restaurants do it with wine lists. A $12 glass, a $14 glass, and a $20 glass—the $14 one is the decoy. You'd never pick it, but it makes the $12 feel like the smart choice. Luna: But does it work in every context? I've seen some research that if the decoy is too obvious, consumers get suspicious. Lucas: There's a boundary condition. If the decoy is clearly a 'joke' option—like a $10,000 bottle of wine next to a $100 bottle—it doesn't work. The brain dismisses it entirely. The decoy has to be plausible enough that you momentarily consider it before rejecting it. Luna: So the decoy has to be within the realm of reasonable choice. Lucas: Yes. And it needs to share the same basic category. A print-only subscription is in the same category as a print plus web. A different product entirely—like a toaster next to a TV—won't create the same effect. Luna: I remember reading about a study with cinema popcorn. They had small, medium, large. But the medium was actually the decoy—it was priced very close to the large, but the large had way more popcorn. So people felt they were getting a bargain. Lucas: That's a classic. And it's why you'll almost never see a linear price to size ratio. The large is always the best value per ounce. The small is for people who really don't want a lot, and the medium exists only to push you up. Luna: Does this work in digital products too? Like app subscriptions? Lucas: Absolutely. Spotify has Individual at $9.99, Duo at $12.99, and Family at $15.99. The Duo is the decoy—it's only for two people, while Family covers up to six. So the Family plan looks like a steal if you have even three people. Spotify knows most households have more than two people. Luna: But you could argue it's just good product design—giving people options at different price points. Where's the line between helpful and manipulative? Lucas: That's the ethical question. The decoy effect is manipulative when the decoy has no real market and exists solely to distort choice. If the medium popcorn actually sells to some people—maybe those who want a specific size—it's fine. If it never sells and exists only to push you to large, it's more dubious. Luna: And regulators are starting to look at this. The UK's Competition and Markets Authority has flagged 'sludge' practices—designs that nudge consumers toward decisions they wouldn't otherwise make. Lucas: Right. But the decoy effect isn't illegal, and it's everywhere. The best defense is to recognize it. Next time you're choosing between three options, ask yourself: is one of these obviously worse? If so, that's the decoy. Luna: And then what? Do you ignore the decoy and just pick what you actually want? Lucas: That's the idea. But it's hard, because the decoy works on system one thinking—fast, intuitive. You have to slow down and ask: 'If the decoy weren't there, would I still pick this?' That's the test. Luna: So the decoy effect is essentially a shortcut our brains take to avoid difficult trade-offs. Lucas: Exactly. When you have two options that are genuinely different on multiple dimensions, your brain struggles. Add a third option that is clearly worse on one dimension, and suddenly the choice feels easy. The decoy provides an illusion of rationality. Luna: I wonder if it works in non-purchase contexts. Like voting? Lucas: There's research in political science. In a three-candidate race, sometimes a fringe candidate acts as a decoy, pulling votes from one mainstream candidate and helping another win. But it's messy because voters aren't rational consumers. Luna: That's a whole different episode. But for marketing, this is one of the most reliable tools in the playbook. Lucas: It is. And once you start seeing it, you see it everywhere. From the grocery store to the car dealership. The key is to be aware without becoming cynical. It's just a tool—and now you know how it works. Luna: And next time you see a medium popcorn, you'll know exactly why.