The decoy effect is a pricing trick that businesses use to make you choose a more expensive option.
It works by adding a third choice—the "decoy"—that is strategically designed to make one of the other options look like a much better deal. This decoy isn't meant to be chosen; its only job is to influence you to pick the option the business wants you to.
You've probably seen this when buying popcorn at the movies:
- Small Popcorn: $3.00
- Medium Popcorn: $6.50 (The Decoy)
- Large Popcorn: $7.00
Suddenly, the large popcorn looks like an amazing value. For only 50 cents more than the medium, you get much more. You feel smart for choosing the large, but you likely wouldn't have considered it if the medium "decoy" wasn't there. That's the decoy effect in action.
Savy (Chief Editor) Jan 17, 2024 • 5 min read
How the Decoy Effect Works on Your Brain
This strategy is effective because our brains don't like to think in absolute terms. We prefer to compare things. The decoy effect takes advantage of a few mental shortcuts, or cognitive biases, that we all have.
- It Simplifies Your Choice: When faced with too many options, we feel overwhelmed. The decoy makes the decision feel easier by making one choice seem obviously superior.
- It Creates a Clear "Winner": The decoy is designed to be clearly worse than the "target" option (the one they want you to pick). This makes the target option stand out as the smartest choice. It Reduces the Fear of Missing Out: By making one option seem like a fantastic deal, it gives you confidence in your decision and reduces the feeling that you might be making the wrong choice.
Real-World Examples of the Decoy Effect
You can find the decoy effect almost everywhere, from your morning coffee run to choosing a software subscription. Businesses use it to guide your choices and increase their sales.
Example 1: Software Subscriptions
Imagine you're signing up for a new service. Most people would choose the cheapest option if given two choices. But look what happens when a decoy is added.
The "Pro" plan is the decoy. It's priced so close to the "Premium" plan that you think, "For just $5 more, I can get all the features. That's a great deal!" Without the decoy, most people would compare the $10 and $30 plans and likely choose the cheaper one.
Example 2: Upgrading Your Tech
When Apple launches a new iPhone, they often use this model. Let's say you're choosing a new phone with these options:
- 128GB Model: $799
- 256GB Model (Decoy): $899
- 512GB Model: $949
The price jump from the 128GB to the 256GB model is significant. But the jump from the 256GB model to the 512GB model is very small. This makes the 512GB model seem like a fantastic value, pushing many customers to spend more than they originally planned.
Savy (Chief Editor) Jan 1, 2025 • 7 min read
Frequently Asked Questions (FAQ)
Here are a few common questions people have about the decoy effect.
Is using the decoy effect ethical?
It's a grey area. On one hand, it's a marketing strategy that helps businesses highlight the value of their products. On the other hand, it can be seen as manipulative because it's designed to make people spend more than they might have otherwise. Most experts agree that as long as the pricing is transparent and the customer receives what they paid for, it is generally considered an acceptable marketing tactic.
Does the decoy effect always work?
No. If customers are very well-informed about the product's value or if the decoy is too obvious, it can fail. The decoy needs to be believable enough to serve as a realistic point of comparison.
How can I avoid falling for the decoy effect?
The best way is to be aware of it. Before making a purchase, ask yourself: "What do I actually need?" Focus on the absolute value of the product to you, not just how it compares to the other options presented.
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