Latest / Sales Leadership with Fexingo: Quota Carriers, Sales Managers, and Revenue Teams / How Sales Reps Can Use The Decoy Effect To Close More Deals
Transcript
- Lucas: Luna, I want to run a quick pricing experiment on you. Imagine you're looking at a subscription for a business intelligence tool. There are two options: a basic plan for $200 a month, and a pro plan for $400 a month. Luna: Okay, straightforward enough. The pro is double the price but presumably has more features. Lucas: Right. Now I add a third option: a premium plan for $500 a month that has exactly the same features as the pro plan — but with a slightly slower support response time. Luna: Wait — so the premium is more expensive and actually worse on one dimension? That seems like a decoy. Lucas: Exactly. And that's the decoy effect — also called asymmetric dominance. By introducing an inferior option that's priced higher or oddly, you make the middle option — the pro plan at $400 — look like the obvious smart choice. Luna: So the decoy isn't meant to be chosen. It's there to make your target option feel like a no-brainer. Lucas: Precisely. And this isn't theoretical. Dan Ariely famously showed this with The Economist's subscription offers years ago. They had a web-only subscription for $59, a print and web subscription for $125. When they added a print-only option for $125 — which was clearly worse than the print and web at the same price — the percentage of people choosing the $125 bundle jumped from 32% to 84%. Luna: That's a massive swing. And the decoy wasn't even a real product they expected to sell. Lucas: Right. It's pure choice architecture. In B2B sales, reps can use this in proposals. Instead of presenting two options — say, a standard package and a premium package — you present three. Your target deal is the middle one. The decoy is a third package that's priced similarly to your target but offers less value on a key dimension. Luna: Give me a concrete example in a sales context. How would a rep actually frame this in a meeting? Lucas: Let's say you sell a CRM platform. Your target is a $30,000 annual contract with 50 user seats and full analytics. Your decoy could be a $28,000 package with only 40 seats and no analytics. Then you also offer a $35,000 enterprise package with 60 seats and custom integrations. The decoy makes the $30,000 option look like the best value: it's only $2,000 more than the decoy but gives you 10 more seats and analytics — while the enterprise option is $5,000 more and might be overkill. Luna: So the decoy is close in price but clearly inferior. That anchors the comparison. But doesn't this feel manipulative? If the buyer figures out what you're doing, don't you lose trust? Lucas: That's the critical ethical boundary. If your decoy is a real package that someone might legitimately buy — say, a stripped-down version for a smaller team — then it's not deception. It's a legitimate option that happens to make your preferred deal look better by comparison. But if the decoy is purely a phantom, like a product you'd never actually sell, that's when it crosses into manipulation. Luna: So the key is that the decoy must be a genuine offering, not a fake one. That makes sense. Otherwise, if the buyer asks detailed questions and discovers the decoy is deliberately bad, you've blown the trust. Lucas: Exactly. And in B2B, buyers are savvy. They have procurement teams, they do competitive analyses. A decoy that's obviously inferior will backfire. But a well-designed decoy that serves a real segment — that's just good pricing strategy. In fact, many SaaS companies already do this with their tiered pricing. The middle tier is often the most popular, partly because the lowest tier is stripped down and the highest tier is expensive with features most don't need. Luna: Right — I've seen that with tools like Slack or Zoom. The free or basic tier is limited, the pro tier hits the sweet spot, and the enterprise tier is for large orgs. The decoy effect is baked into that structure. Lucas: And for a quota-carrying rep, you can apply this in a deal-by-deal basis. When you're crafting a proposal, map out three options. Option A is your decoy — lower capabilities, but priced only slightly below your target. Option B is your target — the deal you want to close. Option C is a premium option that's significantly more expensive. Most buyers will gravitate to B because it dominates A and is a better value than C. Luna: And you're not pushing them — you're just presenting the landscape. It's a nudge, not a shove. Lucas: Exactly. And if the listener found this framework useful — if it gives them a new way to think about their next proposal — that's exactly the kind of thing that makes this show worth doing. If today was actually useful to you, the way these stay ad-free is listener support. You can buy me a coffee at buy me a coffee dot com slash fexingo. Just a simple way to keep the conversations going without any ads. Luna: Yeah, and every bit of support helps us keep digging into these practical tactics. So if you got value, consider it. Lucas: Alright, back to the decoy. One nuance I want to highlight: the decoy works best when the buyer is uncertain about which option is best. If they come in with a strong preference — say, they know they need enterprise features — then the decoy is irrelevant. It's for undecided buyers who are comparing. Luna: So the decoy is most effective early in the evaluation, when the buyer is still forming their criteria. Once they've anchored on a specific need, the decoy loses power. Lucas: Exactly. That's why you want to present the options together, as a set, before the buyer has settled on a favorite. In a discovery call, you might say, 'Based on what I'm hearing, there are three ways we could structure this.' Then walk through them. The decoy frames the conversation around value comparison rather than absolute price. Luna: I've also seen this work in reverse — where the decoy is a super-premium option that makes the target look reasonable, rather than a stripped-down one. Lucas: Right — that's the 'compromise effect' which is related but slightly different. The decoy effect specifically involves an option that is clearly inferior on at least one dimension. The compromise effect just positions your target as the middle option between extremes. But they can overlap. If your decoy is a high-price, low-value option, it acts as both a decoy and a compromise anchor. Luna: Let's talk about a specific sales scenario. Say I'm selling a consulting engagement — a 3-month project for $50,000. How would I build a decoy around that? Lucas: You could create a 'light' version: a 30-day diagnostic for $45,000 that only provides a report, no implementation support. Then your target is the 3-month full engagement at $50,000. The light version is cheaper by only $5,000 but delivers significantly less value. Then you also offer a 6-month deep engagement for $85,000. The buyer sees that for just $5,000 more than the light, they get the full implementation — that's a no-brainer. Luna: I like that the decoy is actually a real service — some clients might want just a diagnostic. So it's not dishonest. Lucas: Exactly. And if a client chooses the decoy, you still close a deal. It's not a loss — it's just a smaller deal than your target. But the presence of the decoy will push more clients to the middle option. Luna: What about the risk of the buyer choosing the premium option? If your decoy is too weak or your target is too close to the decoy, they might jump to the top tier. Lucas: That's actually a good problem to have — a larger deal. But if your goal is specifically to sell the middle option, you need to design the tiers so that the premium option is clearly for a different use case. For example, if the premium includes 24/7 support and dedicated account management, only large enterprises need that. Most mid-market buyers will self-select out. Luna: So the decoy effect is really about framing the value proposition. It's not trickery — it's helping the buyer see the relative value. Lucas: I'd go further and say it's about reducing cognitive load for the buyer. When you present three options, the middle one often feels like a safe, well-reasoned choice. The decoy gives them a clear reason why the target is the best fit. That's actually helpful for the buyer — they leave the meeting feeling confident in their decision. Luna: And confident buyers are less likely to get buyer's remorse or stall on the decision. That's a win for the rep too. Lucas: Exactly. So here's the playbook for reps: before your next proposal, identify your target deal. Then create two flanking options — one that's slightly cheaper but significantly inferior, and one that's significantly more expensive with features most buyers won't need. Present all three together. Let the buyer compare. Watch them gravitate to the middle. Luna: And if they choose the decoy or the premium, you still have a deal — just not the one you expected. So it's a low-risk strategy. Lucas: Low risk, high reward. One final note: test this. If you're in a sales team, try it with a few deals and track the results. See if your close rate on the target deal increases. The data will tell you if the decoy is working. Luna: I'm going to try this in my next deal review. I'll report back. Lucas: Please do. And for everyone listening, give it a shot. It's a small change to how you present options that can have a big impact.