The pricing page is one of the most critical pages on your entire website.

On your pricing page, the user decides whether she wants to buy your product. This page will shape her entire perception of your product. Your pricing page is where the most important action takes place.

How can you help users choose the right option? More precisely, how can you nudge user toward the option that you want them to choose?

Without being too sinister, it is possible through some psychological savvy to compel people to take action on the pricing option that you prefer.

It’s called the decoy effect.

the decoy

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The pricing page is a mind game. You want to exercise the most powerful mind-shaping strategies that you can muster. Decoy effect pricing is one such strategy that can completely change the way that you do online business.

What is the decoy effect?

The Simple Explanation

I’m going to first explain the decoy effect in terms of product pricing with as much simplicity as possible:

When faced with a third choice, a strategically priced decoy, customers will be more likely to choose the more expensive of the other two options.

Here’s how it works. When you have two options, users are forced to make a decision. They can choose the small option for less money, or the big option for more money.

It’s a tough decision. They want more awesome, but don’t want to spend more money. So what do they do? They generally spend less money.

Ah, but now enter the decoy effect. Decoy effect pricing involves adding a third option — the decoy.

The decoy is priced close to the more expensive option, suggesting that the more expensive option is actually better. It’s kind of like a middle option, but it’s so skewed that it makes it seem stupid not to go for the higher-priced option.

The Complex Explanation

The decoy effect is a result of “cognitive biases.” A cognitive bias is the tendency of the human mind to make inaccurate judgments, or believe distortions or other fallacies. Every cognitive bias has a cause. The cause of the cognitive bias is a result of:

1) the things being observed, and

2) the natural disposition of the mind.

Cognitive biases have their impacts in every arena of life, but they do so without our being aware of it. The decoy effect is one such issue.

The decoy effect is also known by the term asymmetric dominance.

The third option is more desirable than one option (dominant), but less desirable than the other option (asymmetric). If an asymmetrically dominated option is present in a consideration set, then consumers will be far more likely to choose the largest (i.e., more expensive) option.

Decoy Effect Examples

As soon as you’re aware of it, you begin to see the decoy effect at play in many situations.

The decoy effect can be used to influence elections, as Shankar Vendentam discussed in the Washington Post. The third-party candidate in a major election is the decoy, causing voters to choose between the two front-runners. That third party candidate can highlight the superiority or inferiority of the two leading candidates based on his or her virtues or deficiencies.

The decoy effect is present in the day-to-day decisions we make. A study at Duke University, which Vendentam describes, showed how it might affect our choice of where to go out to eat.

Joel Huber, the professor who carried out the study, asked subjects whether they wanted to eat at a really nice restaurant (5 star) that was far away, or a medium-nice restaurant (3 star) that was nearby. The dilemma was quality vs. convenience, and subjects had a hard time deciding.

Then, Huber introduced a third choice. He added the option of a 4-star restaurant that took even longer to get to than the 5-star establishment.

How the tables turned! Subjects started choosing the 5-star restaurant with shocking regularity.

So, Huber twisted the experiment again. He added a 2-star restaurant that was positioned halfway between the 5-star and the 3-star. Now what did people choose? The 3-star restaurant. Why? Because their attention was turned to the issue of the 3-star restaurant’s convenience and quality weighed against the 2-star option.

The best example of the decoy effect that I’ve seen is from the National Geographic Channel. Find out how the decoy effect influenced consumers to buy a large popcorn rather than a small or medium.

Without the decoy, the customers would go for the small. Adding a simple middle option created an overwhelming preference for the large popcorn.

The most profound use of the decoy effect is not in elections, restaurant choices, nor popcorn sales.

The most profound use of the decoy effect is in online pricing pages.

Let’s use the famous example of The Economist, and their decoy pricing model.

The Economist provided three options for subscribers — a digital subscription, a print subscription, and a print + digital subscription. It looked like this (minus the headline):

the price decoy effect economist

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Who wouldn’t choose the double option? More value, right? If you can get the print edition for $125, plus the digital, then why would you only get the print edition for the same price!

It makes no sense! It’s stupid not to choose that third option. Right?

Ah, but who’s being duped by whom? The Economist is not being stupid. They are being savvy. They know that the offer looks dumb — two unequal options being sold for the same price! But they also know what they decoy (the middle option) is going to do. It’s going to make you focus on the awesomeness of the third option.

But take away the decoy, and what do you get?

the decoy effect in actionYou have two options with a huge price disparity. The $59 edition is obviously far cheaper but you get the same content. Might as well pay $59 instead of $125!

Ah, the power of the decoy!

Today’s Economist pricing page still uses the decoy effect, with the addition of subtler pricing.

the price decoy effect economist 2014

In this case, the $12 print/digital deal are both decoys. You can get a single deliverable and pick between two equal prices. But you can get both for just two bucks more, plus all that other awesome stuff like apps, audio and espresso. (Espresso? Wut?)

Sharefaith’s signup page includes three plans. Two have identical prices, and the third is “complete.” In this case, the two identical prices function somewhat like The Economist’s double-decoy move above. For just eight bucks more, the “complete” user can get everything! Why not?!

the price decoy effect web hosting

You can use the decoy effect to sell just about anything. The issue with decoys is not what kind of product you’re selling as much as it is about the price at which you’re selling those products.

The idea is simple: Price one item in such a wild way that it makes the other prices seem very reasonable.

How do you use the decoy effect?

Do you want to use the decoy effect on your pricing page? It’s not that hard. Here’s how to do it:

1. Pick which plan or item you want to sell more of.

You’re in control here, because you get to choose which item will sell more.

In the decoy effect example below, let’s say that you want to sell MP3 Player A. You set a price. If your other MP3 player is Player B, customers can see that Player A has more storage, but it costs an extra $100.

You know that $400 is kind of steep for an MP3 player. But you need to sell your stock of Player A. So, you price MP3 Player C — your decoy, which has a little more storage than Player B — at a point far above A. Your goal? To make MP3 Player A look really reasonable.

Price decoy for mp3

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2. Have three choices.

Obviously, you should provide the customer with three choices. The decoy effect simply will not work with two choices, nor will it work with any amount of choices greater than three.

3. The three choices should be intentionally imbalanced.

The goal is to create a decoy. Your goal is not to help users to choose the decoy. Your goal is to use the decoy to get users to choose something else. For this reason, it’s okay to make the decoy look stupid. You want there to be some imbalance.

The decoy should be unreasonably priced, because it is supposed to make the other items seem reasonable by comparison.

The next two points will help clarify.

4. Price the decoy close to the high-priced option.

Remember the popcorn example? Why would you pay $6.50 for a medium popcorn, when you can get a bunch more for an extra 50 cents?

Price the decoy for pop corn(Image source)

The price difference between the decoy and the high-priced option should be negligible compared to the price difference between the decoy and the low-priced option. The greater the disparity, the greater the effect of the decoy on the user’s perception.

5. Make the decoy only marginally better than the low-priced option.

Remember, of course, that price is only one component of the equation. There are features and benefits as well.

Shape the value of the decoy so that it is just a little bit better than the lowest priced item. What this does in the customer’s mind is makes them think, “Wow. For ten bucks more, I only get a few extra benefits? That’s stupid. If that’s the case, I might as well spend just a teeny bit more and get tons of benefits with the high-priced option.”

Let me reiterate the two points above:

  • Make the price of the decoy close to the high-priced option.
  • Make the value of the decoy close to the low-priced option.

6. Be aware of the middle-choice tendency.

The visual display of the options are important, too. Most customers tend to choose the middle option when presented with three options. Since you don’t want people to choose your decoy,  place it in a position other than the center.

The middle choice preference can play into your strategy, though. By placing your preferred option in the center, you can add another influencing factor that will help customers choose that option.

Conclusion

The decoy effect is subtle, yet powerful. Once you begin to understand how it works, you start to see it everywhere. It affects the way you buy groceries, choose a house, pick a restaurant, and purchase periodical subscriptions.

The most profound way that it can affect you is by putting it into practice on your website. The process is simple. Pick the plan you want to sell. Provide two more choices. Get the decoy jacked up, and watch the sales pour in.

It’s almost too good to be true. Thankfully, though, it is good and it is true. And you should start using it as soon as possible.

 

 

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