Hey 👋 The Crew here.
Believe it or not, some of the best and most powerful psychological effects we’ve ever written about were sent when this newsletter had 3,000% fewer readers than it does today.
So we decided to share the first effect we ever covered, blow the dust off it, and add some fresh takes so you can implement it in your campaigns in five minutes.
Start your timers. Let’s roll.
Reading time: 4 minutes, 48 seconds
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Decoy Effect
You go to the cinema and want to order popcorn.
You’re offered three options—a small popcorn, a medium one, and a significantly bigger one that is only a tad pricier than the medium option.
Obviously, you think there’s no point in buying the medium one, so you upgrade to the larger one since it only costs a little extra.
But you were never meant to buy the medium in the first place. It was just a decoy.
And it’s the oldest, yet most effective marketing trick in the book.
In one of his TED talks, renowned psychologist Dan Ariely explains how decoys affect our decisions by using the pricing page from The Economist:
At the time, the magazine offered three types of subscriptions:
- Target option: Print and Web, because it was the most profitable product.
- Decoy option: Print only, which cost exactly the same as the target.
- Competitor option: Web only, which may “steal” some shoppers from the target since it’s better in terms of price.
How a decoy works: Dan offered the above options to 100 MIT students. None of them chose print only… but 84% chose print and web bundle.
Now, what if you removed the decoy, print-only option?
Dan did that, too.
And when he did, 68% chose web subscriptions, while only 38% chose print and web.
In other words, 52% of users downgraded from the pricier option.
So yes, the Decoy Effect is super effective. Here’s how you can use it, too…
Three ways you can leverage the Decoy effect
1) Always pick three levels of products or services
From McDonalds’ fries to The Economist’s subscriptions tiers, there are always three choices.
And for good reason. Pick two options, and you can’t set up a decoy. Pick more, and you overwhelm your shoppers.
What if you don’t have three different levels of a product? You can bundle two existing ones, similar to how The Economist did it.
Group two or more products, but make the most profitable bundle the target option.
2) Set your decoy price close to the target’s price
When pricing the three levels, your decoy should be better than your competitive offering, but still priced close to the target’s price.
The proximity makes it easier for shoppers to compare the value.
That may sound counterintuitive, but take a look at how Starbucks’ does it:
The smaller difference in price for gaining more coffee makes the decoy not seem worth it compared to the target.
Even if most people would prefer to drink a medium coffee, they’d rather pay for the large one.
3) Make use of the center-stage effect
The center-stage effect is a science-backed human tendency to focus on the middle of any choice set.
So if you ever want your shoppers to focus on something, you place it in the middle.
There are two ways to leverage this:
- Place your decoy in the middle. They’ll then spend most of their time comparing it to competitor and target options—making them opt for more value.
- Place your target in the middle. Since people are biased to focus and pick the middle option first, you might want to put your target in the middle with the “best value” or “most popular” label. In this case, decoy goes last so users can compare the two.
In Squarespace’s case, the decoy even costs more than the most target product:
Customers won’t see the point in spending more than necessary, but at the same time will feel like they’re getting much more than the cheapest option.
And the target should still sell better than without the decoy.
AFFILIATE MARKETING: Evan Weber, an influential figure in affiliate marketing with 20+ years of experience, reveals how to work efficiently with LinkedIn and other trendy platforms. Real money talk, the journey to affiliate influencer on LinkedIn. Discover all of Evan’s tips here.*
CONTENT MARKETING: Is the ROI on your content hit-or-miss? Boris is a content marketing consultant who can help you create an effective, product-led content strategy that will drive consistent growth for your B2B SaaS just like he did for companies like Hunter.io and Hubstaff. Visit his website to book a free consultation.*
CRO: Selling a pleasurable, fun product? Use a rounded font. It can boost your conversion rate by 26% according to studies. Likewise, people prefer seeing functional products displayed with sharp fonts. Interesting.
PINTEREST: There are more active Pinners than ever—and a lot of them are Gen Z. The platform has seen a surge of active, engaged users in recent months. But is it a good channel to test your ads? This article might help you decide.
AI MARKETING: ChatGPT’s search engine is near. The likes of Bloomberg and Verge reported this week that the company is going as far as poaching Google employees—but the product won’t look like the well-known search engine. That is according to Sam Altman himself. Fun times.
*This is a sponsored post.
ICYMI, last time we looked at the Valence Effect.
The “We’ll take option 3” Crew
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