Decoy effect explained

By | March 14, 2017

Decoy effect is a marketing strategy that can help increase sale revenue by adding a “noise” option between a fair and high prices option. Below is an example of decoy effect.

What is Decoy Effect in Marketing and Sale

One popcorn stand is offering 2 options, small cup for $3 and large cup for $7. The vast majority of customers pickup small cup (for $3) since they all think $7 is a quite much with a popcorn. When this stand adding a “noise” price option of $6.5 for the medium size of the cup, the mainstream come to the large cup option for $7. They think with only 50 cent in different (between $6.50 and $70) so large cup should be a big deal. Just by following the rule of decoy effect, the popcorn stand increase a huge revenue, nice work!

In marketing, the decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated.

You can use the decoy effect to sell almost 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.

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