What is the decoy or attraction effect and how to overcome it
You know how marketers are always trying one way or another to get you to buy stuff? Well, this is one of the techniques they use.
The attraction or decoy effect is a widespread psychological effect used by marketers to push consumers to buy more expensive products. An experiment by National Geographic (two minutes) shows it in action:
They started with two groups of moviegoers, A and B:
- They offered two options to Group A: a small sized popcorn for $3 and a big sized popcorn for $7. The majority chooses the small option.
- To group B, they offered a new option: a medium-sized popcorn for $6.5. And just like that, almost everyone went for the bigger size.
With just a small addition and no changes to the original sizes, consumers changed their choice to the most expensive one. Intriguing! Having a frame of reference enabled customers to see value in more popcorn at only $.05 more.
More examples of decoys in action
A study by Joel Hubert 1 shows how this effect is present in our everyday life.
When you go to the store:
” Consider going into a store and finding [a] large range of shirts in one style and … a narrow range in another. If one wished to be in fashion one might justifiably infer that the shirt with few items similar to it is less popular this season and thus be likely to buy it.”
Or when you sign up to a newspaper:
The only role of the basic $125 subscription is the make the middle option more valuable.
How to identify the effect
Whenever you have a choice to make between three products, the decoy effect is potentially in place.
- If a product’s pricing doesn’t make sense (i.e: an mp3 player being more expensive and having less capacity than another)
- If a product’s pricing just seems to be making another product better.
If 1 or 2 apply, then chances are the product is a decoy meant to nudge you toward buying the highest priced option.
How can I fight back?
The only winning move is not to play. If you don’t buy anything, then you overcome the bias every time. But unless you are a Buddhist monk, this isn’t likely to be your case.
So for the rest of us who need to buy things from to time, here’s a simple method. When you go buy something, and there are three options, identify the decoy (if there is one) and mentally discard it. Instead, compare the products as if there were only two options.
By doing so, you remove the bias and are able to make comparisons with a clear mind.
Have you encountered the decoy effect in your own life?
The Oracle of FI is a middle-class guy working as a software developer. His goal is to achieve full financial independence by the age of 40.
He started this blog in 2019 in order to share his tips and techniques on investing, saving money and making the most out of life.
He has a cat and lives in France.