What Is the Decoy Effect?
The decoy effect is a psychological tactic marketers use to influence customer decisions. It occurs when introducing a third, less attractive option (the decoy) makes one of the original options appear more appealing. The decoy isn’t meant to be chosen—it’s there to nudge customers towards the option you actually want them to pick.
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How the Decoy Effect Works in Marketing
Let’s say you’re selling a subscription service with two pricing options:
- Basic: £39/month
- Premium: £99/month
Customers might initially hesitate to choose Premium, seeing it as expensive. But if you introduce a third, strategically placed decoy option, you can shift their perception:
- Basic: £39/month
- Standard: £89/month (decoy)
- Premium: £99/month
Now, Premium looks like a much better deal. Customers see that for just £10 more than Standard, they get significantly more value. The decoy (£89) isn’t there to sell itself—it’s there to make Premium (£99) the obvious choice.
Why the Decoy Effect Works
The decoy effect taps into several cognitive biases that shape consumer decisions:
- Relative comparison: Customers rarely evaluate options in isolation. They compare available choices, and a decoy makes your preferred option stand out.
- Perceived value: By positioning the decoy close in price but lower in value, you enhance the perceived value of your target option.
- Simplified decision-making: Customers prefer easy decisions. A decoy simplifies their choice by clearly highlighting the best value.
Real-World Examples of the Decoy Effect
Businesses across industries regularly use the decoy effect to drive growth:
- Subscription services: Companies like Netflix and Spotify often offer three-tier pricing, nudging users towards the middle or highest-priced option.
- Retail: Coffee shops frequently price medium-sized drinks close to large ones, making the larger size seem like better value.
- SaaS pricing: Software companies often position a mid-tier plan as a decoy, encouraging customers to select the premium plan.
How to Implement the Decoy Effect in Your Growth Marketing Strategy
To effectively leverage the decoy effect, follow these best practices:
- Clearly define your target option: Identify the product or service you want customers to choose.
- Create a compelling decoy: Position the decoy close in price but noticeably lower in value compared to your target option.
- Test and optimise: Experiment with different pricing structures and decoy placements to find the most effective combination.
How Growth Method Helps You Leverage the Decoy Effect
Implementing psychological principles like the decoy effect requires a structured, data-driven approach. Growth Method is the only work management platform built specifically for growth marketers, helping you systematically test, analyse, and optimise your marketing strategies.
With Growth Method, you can:
- Ideate effectively: Generate and categorise hypotheses around pricing and positioning, ensuring alignment with your growth goals.
- Run structured experiments: Move your pricing experiments through clear stages—building, live, analysing, and complete—to maximise learning and velocity.
- Analyse results: Integrate seamlessly with analytics platforms like Google Analytics, Amplitude, and MixPanel to measure the impact of your decoy pricing strategies.
- Report clearly: Provide stakeholders with professional, detailed reports that clearly demonstrate the ROI of your marketing experiments.
“We are on-track to deliver a 43% increase in inbound leads this year. There is no doubt the adoption of Growth Method is the primary driver behind these results.” Laura Perrott, Colt Technology Services
Final Thoughts
The decoy effect is a proven psychological tactic that significantly influences consumer behaviour and drives growth. By strategically positioning your pricing and product options, you can guide customers towards the choices that best align with your business objectives.
Growth Method empowers your team to implement, test, and optimise these strategies effectively, ensuring you consistently deliver measurable results.
Ready to leverage the decoy effect and accelerate your growth? Book a call today and discover how Growth Method can help you systematically grow leads and revenue.
Want to explore more psychological principles to enhance your marketing? Check out our articles on Anchoring and Priming, Framing, Price Perception, Choice Paradox, Loss Aversion, Logic vs Emotion, Frequency Bias, The Hooked Model, and the HIPPO Effect.