INTELLIGENCE BRIEF:
The Decoy Effect is a proven strategy in behavioral economics. The idea is that when given three options, people tend to choose the target package if the third “decoy option” makes it appear more attractive.
In a famous study by behavioral economist Dan Ariely (Predictably Irrational, 2008), MIT students were offered these subscription choices for the Economist:
- Web Only = $59
- Print Only = $125 (decoy)
- Web + Print = $125 (target package)
Few chose “Print Only,” but its presence dramatically increased sales of the more expensive Web + Print bundle over the cheaper web only version.
The Decoy Effect leverages the contrast principle—making your intended option look like the smartest, safest choice.
Brands use this daily to guide customers toward premium or high-margin offers.
YOUR MOVE:
Design your pricing tiers to lead clients to your preferred offer.
THE PLAYBOOK:
Look at ways to strategize your pricing:
- Create three package or product levels: basic, mid-range, and premium. People will gravitate to the mid-range if the basic seems too small and the premium too excessive (or expensive).
- Make the middle offer the clear standout by over-delivering on value. An offer that contains more extras than expected for the mid-range option will feel like a steal.
- Test adding a decoy high-end, premium version of one of your products or services. Even if no one buys it, your standard offer will seem more reasonable by comparison.(Bonus if people buy your luxury option, too.)
WHY IT WORKS:
People avoid extremes and instinctively seek middle ground when faced with uncertainty. The Decoy Effect leverages this by presenting choices that make your target offer feel safe, smart, and satisfying.
THE FINAL WORD:
In business, you control which products sell. They’re intentionally positioned to win.
