Series 2, Episode 18: Decoy Effect
Welcome back to the bitesize behaviour podcast and an episode I’ve been looking forward to because the behaviour we’re discussing today is one of the most fascinating behaviours we have. It's a behavioural bias exploited by marketing companies, shop owners, cinemas… and it’s called the Decoy Effect, and it’s really easy to explain and see how we fall for it many, many times.
The decoy effect is when we - consumers - change our preference between two options when we are presented with a third option – the decoy. Let me give you an example that is the most used in the world of behavioural science.
Imagine you go to a cinema and see two options for popcorn. A small popcorn costs you £3 and a large popcorn costs you £7. The evidence suggests that most people, when faced with only these two options, go for the small popcorn that only costs £3. However, add a third option - a decoy - a medium popcorn for £6.50 and now most people will now go for the large. It’s only 50p more than the medium size and you seem to get so much more value for money. But the simple fact is, by adding a decoy, you end up spending more money that you would if the decoy didn’t exist in the first place.
In other words, the decoy effect is where an unattractive or more expensive option is added to the options available to make an alternative option look more attractive or not as expensive as its actually is.
Another real-world example, and one that I know first-hand goes on is restaurant wine lists.
Imagine you went to eat at a restaurant where they offered two bottles of wine for sale. One was £10 and the other was £30. In comparison, the second wine seems lot more expensive than the first. But add in a decoy, a bottle for £60, and you can relegate the £30 bottle from expensive to reasonable. We can make it seem better value but adding in a more expensive bottle of wine - the £60 bottle.
I know that listening to this you’re probably thinking that you wouldn’t fall for such a simple, a slightly devious trick, but the fact is, we don’t really think about it, or even know that it’s happening in the first place.
So let’s try this using an example from Dan Ariely’s book Predictably Irrational, which is a great book to read by the way if you want to learn more about how we make decisions.
In his book, Dan poses this question.
“You’d like to take a European vacation and you’re presented with two options to choose from: Rome or Paris. Both have great sightseeing opportunities, both have incredible food and both hotel options include free breakfast each morning. But you can only pick one.
When faced with these two options alone, you won’t be surprised to learn that the split is pretty much 50 / 50. Half go for Paris, half go for Rome. But here is where it gets interesting.
Add in a third choice - a decoy - of Rome but without the free breakfast each morning. So you have to choose from:
Rome with breakfast
Paris with breakfast
Rome without breakfast
Which option would you choose?
You might think that 50% would still pick Paris, and perhaps the Rome trips would be equally split 25% with free breakfast and 25% without breakfast. But that’s not what happens at all.
The evidence shows that Rome with the free breakfast now gets around 75% of the vote, with Paris 25%. Rome without breakfast gets no votes.
By adding in a decoy or Rome without breakfast it makes Rome with breakfast seem much more attractive than it perhaps is, whilst at the same time, somehow, making even Paris seem less attractive.
But there are ways around this, ways to beat the system, if you have the will to do so. The best way is to actually turn this into a game, a game of "spot the decoy".
If you play this game when you shop, or are buying something online - which is where you can see more and more decoys being used - you quickly learn how to spot value. You learn to spot the thing that is there to make you spend more money that you need to or want to.
The next time you’re online and looking at taking out a subscription for something, I would take an educated guess that you’ll be presented with three options. A cheap or free version, a premium version, and then a middle version that makes the premium version look better value than perhaps it is.
Accept that this is what people want you to buy, so take the time to consider what it is you want to buy in the first place, and stick with this. Don’t let the decoy beat you.
So - that’s it for today. In the next episode of Bitesize Behaviours, as we come to the end of this series, we’ll look at another fascinating behavioural bias that we all have. We’ll look at the Peak End Rule.
See you next time on bitesize behaviour.