The Decoy Option: What Makes Customers Spend More?

Imagine this, you have a choice of a small, medium or large latte. The small is £3, the medium is £4.50 and the large is £4.99! There's such a small difference between the medium and the large, so you choose the large as a great bargain. You've fallen for the decoy effect! The medium is a decoy to make the large seem cheaper. If customers had a choice between just a £3 small and a £5 large, they'd be more hesitant to choose the large. The decoy effect is adding a less attractive option to make the higher priced one more desirable.

Almost everyone has probably fallen for it at some point, but different personalities and thinking styles impact how likely someone is to be influenced by it. Impulsive, intuitive people are more likely to be taken in. The presentation of the decoy effect makes it feel like a better deal. Rational, logical thinkers who take time to evaluate before making a purchase may not be swayed by the decoy.

Studies have shown that the decoy effect influences other parts of life, from choosing a restaurant to selecting a date online to choosing a candidate for a job. Adding any less desirable option to the mix makes others more attractive by comparison. Being aware of this effect can help you when making decisions.

While you don't want to be fooled by it yourself, it's a helpful tool in sales. When you're offering bundle packages, offer three rather than two so customers will choose the highest value one. You can also use this to command higher value for products that are actually almost equal in value. Comparison and framing have a high impact on customer behaviour, so it's best if you can use that to your advantage.