🪆 Decoy Effect:
Preferences change when a less attractive option is introduced.
Mailchimp
Very, very premium
Apple
Decoy accessories
Although we like to imagine that we make decisions in a totally rational vacuum of 'value for money', we don't.
We broadly make decisions based on comparative values, based on the choices available.
Some companies will knowingly create an 'objectively-unsuitable' package (or tier), with the sole purpose of making the other options feel like better value for money.
It's called a decoy, because very few people are expected to actually buy it.
Take an abstract popcorn example:
Popcorn is expensive, and you may find yourself opting for the 'Small' bucket. $8 feels like a lot to spend on popcorn.
But the presence of the 'Medium' tier, makes the 'Large' feels like better value for money.
The 'popcorn per dollar' value of the small option hasn't changed, but customers may be more likely to spend more money at the cinema.
✅ Purchases
Upselling (i.e., can be used to increase average basket size).
Easier to make a decision (i.e., one option may immediately feel like the best value).
✅ Perception of value
Modified value proposition (i.e., the other options feel like better value).
The most famous example of this was from The Economist.
In short, they initially launched with two packages: digital only ($59) and both print and digital ($125).
But customers were favouring the digital only package, and they wanted readers to subscribe to the more expensive package.
Their solution: to add a decoy tier, of just the print version for $125.
By comparison, the digital and print bundle looked like great value—"you're getting the digital subscription for free".
It's rumoured that this increased their sales by 43%.
When looking at the pricing table for 500 contacts, you're shown the Premium tier which is about 15x more expensive than the 'Standard' tier.
"Wow, compared to the £283 p/m option, £16 p/m feels like great value!".
Although they'd never admit that this is what they do, Apple will routinely release very expensive accessories at the same time as product launches.
Did anyone buy the £699 wheels? Or the £300 book?
It's possible that they existed primarily to, by comparison, make the new mainline products feel cheaper.
i.e., a new £800 iPhone doesn't feel that expensive, if they also release a £699 set of wheels.
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