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The decoy effect in marketing is defined as the phenomenon whereby consumers change their preference between two product options when presented with a third product option – the “decoy”.
The Decoy is completely dominated by the product 1 option and only partially dominated by the Product 2 option. The decoy is priced to make one of the other options much more attractive so that customers don't think about buying the existing options. It is also referred to as the asymmetric dominance effect.
The effect was first demonstrated by academics Joel Huber, John Payne and Christopher Puto in a series of experiments, in which participants were asked to make choices in scenarios involving beer, cars, restaurants, lottery tickets, films, and television sets. Except for the one scenario involving lottery tickets, the presence of a decoy increased the percentage of people who said they would pick the target and thus making it a very predictable outcome when a decoy is present.
The Decoy Effect in Marketing is part of neuromarketing and we study it along with other cognitive biases. let's understand with an example.
Have you ever bought fries at McDonald's? Next time, notice how they come in three sizes: small, medium, and large. The large pack of fries is usually disproportionality priced. It's much bigger than the medium, but the cost difference is insignificant.
Guess what? The larger pack is not intended to be bought at all. It is only there to make the medium-sized one look more value for money. The medium is the real target that the business wants you to buy. People might not automatically gravitate towards the medium when choosing between the small and the medium. Yet, when the large size is introduced, the medium grows in value. This is the decoy effect.
Our mind tends to be fooled into changing our choice when a third option is presented. The decoy effect is used in marketing to shift the customers' focus to the target product subtly. And the satisfied customer goes home thinking they got a good deal!
Read another interesting take on Anchoring bias as on Neuromarketing Tactics that you can use in Digital marketing https://www.skillcamper.com/what-is-the-anchoring-bias.html/
