#74 The Decoy Effect

The Decoy Effect: How You Are Influenced to Choose Without Really Knowing It

Think you got a good deal? Look again.

The decoy effect is the phenomenon where consumers swap their preference between two options when presented with a third option.

Price is the most delicate element of the marketing mix, and much thought goes into setting prices to nudge us towards spending more.

There’s one particularly cunning type of pricing strategy that marketers use to get you to switch your choice from one option to a more expensive or profitable one.

It’s called the decoy effect.

Imagine you are shopping for a Nutribullet blender. You see two options. The cheaper one, at $89, promotes 900 watts of power and a five-piece accessory kit. The more expensive one, at $149, is 1,200 watts and has 12 accessories.

Which one you choose will depend on some assessment of their relative value for money. It’s not immediately apparent, though, that the more expensive option is better value. It’s slightly less than 35 percent more powerful but costs nearly 70 percent more. It does have more than twice as many plastic accessories, but what are they worth?

Now consider the two in light of a third option.

This one, for $125, offers 1,000 watts and nine accessories. It enables you to make what feels like a more considered comparison. For $36 more than the cheaper option, you get four more accessories and an extra 100 watts of power. But if you spend just $24 extra, you get a further three accessories and 200 watts more power. Bargain!

You have just experienced the decoy effect.

Asymmetric Dominance

The decoy effect is defined as the phenomenon whereby consumers change their preference between two options when presented with a third option – the “decoy” – that is “asymmetrically dominated”. It is also referred to as the “attraction effect” or “asymmetric dominance effect”.

What asymmetric domination means is the decoy is priced to make one of the other options much more attractive. It is “dominated” in terms of perceived value (quantity, quality, extra features and so on). The decoy is not intended to sell, just to nudge consumers away from the “competitor” and towards the “target” – usually the more expensive or profitable option.

The effect was first described by academics Joel Huber, John Payne and Christopher Puto in a paper presented to a conference in 1981 (and later published in the Journal of Consumer Research in 1982).

They demonstrated the effect through experiments in which participants (university students) were asked to makes choices in scenarios involving beer, cars, restaurants, lottery tickets, films and television sets.

In each product scenario participants first had to choose between two options. Then they were given a third option – a decoy designed to nudge them toward picking the target over the competitor. In every case except the lottery tickets the decoy successfully increased the probability of the target being chosen.

These findings were, in marketing terms, revolutionary. They challenged established doctrines – known as the “similarity heuristic” and the “regularity condition” – that a new product will take away market share from an existing product and cannot increase the probability of a customer choosing the original product.

How Decoys Work

When consumers are faced with many alternatives, they often experience choice overload – what psychologist Barry Schwartz has termed the tyranny or paradox of choice. Multiple behavioural experiments have consistently demonstrated that greater choice complexity increases anxiety and hinders decision-making.

In an attempt to reduce this anxiety, consumers tend to simplify the process by selecting only a couple of criteria (say price and quantity) to determine the best value for money.

Through manipulating these key choice attributes, a decoy steers you in a particular direction while giving you the feeling you are making a rational, informed choice.

The decoy effect is thus a form of “nudging” – defined by Richard Thaler and Cass Sunstein (the pioneers of nudge theory) as “any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options”. Not all nudging is manipulative, and some argue that even manipulative nudging can be justified if the ends are noble. It has proven useful in social marketing to encourage people to make good decisions such as using less energy, eating healthier or becoming organ donors.

In the Market

We see decoy pricing in many areas.

A decade ago behavioural economist Dan Ariely spoke about his fascination with the pricing structure of The Economist and how he tested the options on 100 of his students.

In one scenario the students had a choice of a web-only subscription or a print-only subscription for twice the price; 68 percent chose the cheaper web-only option.

They were given a third option – a web-and-print subscription for the same price as the print-only option. Now just 16 percent chose the cheaper option, with 84 percent opting for the obviously better combined option.

In this second scenario the print-only option had become the decoy and the combined option the target. Even The Economist was intrigued by Ariely’s finding, publishing a story about it entitled “The importance of irrelevant alternatives”.

Subscription pricing for The Australian today replicates this “irrelevant alternative”, though in a slightly different way to the pricing architecture Ariely examined.

Why would you choose the digital-only subscription when you can get the weekend paper delivered for no extra cost?

In this instance, the digital-only option is the decoy and the digital+weekend paper option is the target. The intention appears to be to discourage you from choosing the more expensive six-day paper option. Because that option is not necessarily more profitable for the company. What traditionally made print editions profitable, despite the cost of printing and distribution, was the advertising they carried. That’s no longer the case. It makes sense to encourage subscribers to move online.

Not all decoys are so conspicuous. In fact the decoy effect may be extremely effective by being quite subtle.

Consider the price of drinks at a well-known juice bar: a small (350 ml) size costs $6.10; the medium (450 ml) $7.10; and the large (610 ml) $7.50.

Which would you buy?

If you’re good at doing maths in your head, or committed enough to use a calculator, you might work out that the medium is slightly better value than the small, and the large better value again.

But the pricing of the medium option – $1 more than the small but just 40 cents cheaper than the large – is designed to be asymmetrically dominated, steering you to see the biggest drink as the best value for money.

So have you just made the sensible choice, or been manipulated to spend more on a drink larger than you needed?

Gary Mortimer is an Associate Professor in Marketing and Consumer Behaviour at Queensland University of Technology.

Quoted without permission.

#73 The Branding Lie

The foundation of your brand is your logo. Your website, packaging and promotional materials – all of which should integrate your logo – communicate your brand.
– REFERENCE: https://www.entrepreneur.com/encyclopedia/branding

Barf! Megabarf! Your brand is not your logo. Branding is about positioning strategy. The shortcut to buyers motive. What you name your product is always more important than what you call your niche business. To make a logo have meaning requires too much energy, ego, time, and money. It’s nonessential to success. It is a fairy-tale.

#31 Searching for the Perfect Page

Jan Tschihold

Jan Tschichold (1902–1974) is a person of interest in the world of graphic design. He worked hard perfecting – or searching for perfection – in various project. One of my favorites was his creation of the Sabon type family in 1964.

Sabon font family includes 6 weights plus italics and Small Caps and Old style.

Tschichold was a typographer, book designer, teacher and writer.

ONE OF THE THINGS I found fascinating about him was his research of ancient books to find how to divide a page in pleasing proportions. He studied the page layout of ancient monks and Gutenberg’s 9×9 layout and eventually demonstrated the geometry and published about his findings.

Gutenberg’s 9×9 layout

 

Tschichold perfect book.

I then did an experiment to see what the “grid” would be for 8.5 x 11 inch pages. The dimensions are shown below.

My Americanized version.

 

Stretchy fluid web page with “perfect” percentages.

So, you may ask, “What good is this esoteric information for what I’m designing?”

If you are attempting to create a historical theme with a “feeling” of being “old, ancient, or spiritual,” – perhaps even wise – this is a good format. It’s great for storybooks and fairy tales. It may be appropriate for a thematic brochure. The idea is the page layout alone creates a subconscious “reminder” of days gone by. In reality, it’s not “perfect” for every application. But trying it out on your page dimensions can give you new perspective.

#71 Solving a color match problem

I and the client company’s marketing manager had to solve a color problem. The company logo was two colors: red and an orangish-yellow with black type set in Franklin Gothic Extrabold.

The company built industrial aluminum molds for casting and forming products or packaging from foam, plastic, and other materials.

1. The company logo was originally designed by the owner’s now ex-wife. No records existed of what colors were used.2. After that time, the logo was printed on letterhead by a subcontract designer, Melisa. She was available by phone. She had no written record of what the colors were but had a good guess.

3. A third designer (an IT guy) put together the website and used what he thought were the right colors in hex code. They didn’t match the print version.

So we had three sets of colors. In addition to this, when I pointed out the inconsistencies, The marketing manager said,

4. “All I really want is the color to match our business card.” That introduced a fourth color combination.

So I dove into analyzing the colors and comparing them. I then made three visual charts to demonstrate to them the results. In the end, I made recommendation of what we should specify for print and web media. I thought I’d share how that “looked” and also a couple of pages of the resulting website style guide.

It was necessary to coach the client and his boss about the differences in RGB, CMYK, and Pantone color gamuts. They actually enjoyed learning this stuff.

Doing this analysis and presentation earned me some extra money and brought in not only the website rework but also a print presentation portfolio for tradeshows. Around $4,900 in time. The moral of this story: Presentation makes a difference. Don’t just tell them. Show them and document your work. It makes you more professional.

Websafe colors were specified but not necessary. I chose those to keep things simple and memorable when designing. Websafe is not a necessary feature.

The story doesn’t have a happy ending. In recent years, after over 25 years in business, the company was forced to close it’s doors permanently because of offshore competition. Sad day in Mudville to see a company die. I still wear my D8 T-shirt they gave me – in their memory.


Those RGB references were either supplied by the previous designer’s “guesses” or from flatbed scans. Neither were super reliable but it was all we had. They were inconsistent. The client was paranoid about color consistency being fixed. But they never realized how all of their colors really were all over the map. This was mainly a method of “opening their eyes”. They thought they had a standard. They didn’t.

Like most machine shops, they were very big into standards. So I was helping them develop those for each medium– web and print. They saw how they couldn’t get exactly the same rendering in each environment but they could get things a lot closer with some adjustment and coaching.

Mainly, this diminished their anxiety of appearing foolish (the owner actually had a 4-year degree in graphic design!). To me, all I wanted was a decision. This presentation made that decision easier for them.

Grayscale differential (contrast) was important in making things work online. It also helped them see why yellow type on white wouldn’t work.

All that mattered was the client get over their stress so we could move on and finish projects.

#70 Calibrating color – don’t even try

I use 4 LCD screens and none of them are calibrated. They all render color differently.

Two of them I bought used and bruised – on purpose. The other two on Cyber-Monday sale. I like it that way because it allows me to see the range of aberration the client may see – whether it’s for print or web projects. And as you know, I’m a cheapskate. Creativity is the inverse of dollars. C=1/$

I only have a letter-size b/w laser printer for business
correspondence (as I said “invoices”). I don’t proof in my studio any more. If I want to see it, for safety sake (rarely), I have it output on a weekly-calibrated digital printer at my favorite shop. I’m comfortable with my methods and know what to expect. Printing is not just an act of faith any more.

Most of the color problem is with the client and not your equipment. It’s cheaper to “fix” the client. It can be as easy as buying and gifting them a Pantone fan for reference. I’ve done that. They love it. It works great for communications.

I see all screen calibration gadgetry as preying on the anxieties of designers. It’s a human problem not a machine problem.

If you are going to spec Pantone and print it in 4-color CMYK then I recommend buying a conversion-shift swatch book (Pantone process color simulator $239 -color bridge). I bought mine used on Ebay. It was missing a few swatches but it only cost me $20. I then, in advance, show the client how the color will change when printed. They are shown side by side for comparison. see image below.

#68 Naming makes a difference


I actually am more diplomatic than I let on. I’m just trying to intimidate with my pretend vastness. But, yes, I do ruffle some feathers. Those are non-clients who I don’t work with. Not everyone who walks in the door is a qualified lead.

But I’m not done yet. Here is an example of where I recommended a name change that made the startup company bucks. I merely told them their company name was boring.

The original name of the company (I can’t even remember now) but it was two multisyllabic words that sounded very academic, presumptuous, and meant nothing to me or their audience. In fact, the goal was to make math exciting. It did the opposite, scary sounding. After my usual lecture on naming, I had them read “Positioning: The battle for the mind.” We then came to a consensus that a better name would be “MathFire.”

They won $10,000 in a business plan competition shortly after where I served as their marketing coach. I didn’t win. They did.

That’s the goal: make the client a winner. If you take on clients who won’t or can’t win, you’re rightly going to get some of the blame. It’s bad for business. So be selective.

#65 Thinking backwards

I’ve been an advocate of author Marty Neumeier’s thinking – but his day in the sun has probably past, I think. You can read about him here. And one of his books I’m going to quote from at slideshare. As with all author’s, I do NOT agree with everything he says. But I’m still a fan-boy. He was the publisher of CRITIQUE magazine.

Anyway. he said in The Brand Gap people need to know three things: “who you are,” “what you do,” and “why I should care.” That’s the basis for a logo, a business card, a trade show booth, or a website home page. You have to answer those questions fast. Pretty simple. The “why I should care” question is the one business people agonize over.

I’ve learned Neumeier has the emphasis backwards.
“Why?” is most important, not last in the hierarchy of thinking. You have to start there and work outwards.

Apple may “think different” – but I think backwards or opposite. Thinking of new ways to do things is a crucial part of who I am. I’m never content with doing something the conventional way if a better way is possible. Unconventional. That is why I put up resistance to ideological fads and trends. They’re suspicious to me. Fast buck shortcuts are usually fairy tale.

Trivial note: Apple’s annual R&D expenditure is much lower than industry standards: 2%. That’s what a low-tech company usually spends – not a high-tech one (more like 4% or more.)

The truth be known, I only ask clients “what they want” to be polite. I usually then show them they’re chasing the wrong butterfly. I’m more diplomatic than that. Sort of. My point was their perspective usually has nothing to do with emotion.

I focus a lot on subconscious cuing. This is called “transparent features” in web speak.

Using fear as a motivator with people’s “lizard brain” doesn’t feel right to me. It’s not life-oriented but death.

#64 Business owners don’t get it

I read an article last night that “advertising” is dead. We have to use new labels to let people know we are in this present time and not the past – but the goal is still the same. Increase sales or promote an idea.

Advertising is Dead >

I do not agree with everything in this article. No big surprise, eh?

But I do agree times and methods have changed and we must adapt. The cycles for adaptation seem to come faster. But I suspect this is a matter of perception than actual evidence. Many methods and processes used to be more complex. They have gotten simpler and easier to understand.

So it’s not that problems have gotten harder. My willingness to adapt has shrunk. This is attrition or atrophy of my brain. “I don’t wanna” keeps me from embracing the next idea. Is it possible we’re weary of change and we can’t get off the ride?

When we talk about the client or customer “pain,” we’re exploring positioning strategy. Positioning is the shortcut to the buyer’s motive. Motive is based upon anxiety or pain. Same thing, new label.

I communicate in terms of profit and ROI to my clients. Business owners don’t get the touchy-feely design world I live in (INFP Meyers-Briggs profile.) My whole client presentation is couched in terms of profit and ROI (unless they’re an artist, of course.)

My goal is to convert their goals into a strategy of feeling and emotion – but if I told them that upfront – I’d never get hired. So I secretly work in reverse (backwards again.) Then make my presentation to logic and reason. I attempt justifying why orchestrating design choices -type, colors, symbols, etc– will help them achieve their goals. If I can speak in prejudiced, us-vs-them language, they’re left-brainers – like 51% of the U.S. population. They’re “Guardian” managerial-types (aka suits.)

Emotion (and thus design quality) as a strategy has risen in the awareness of modern businesses – especially based on Google and Apple’s success with user experience. UX is about how people feel when using a product or service. It’s become a way to differentiate a product from the herd (especially when all products look the same when they’re turned off.)

This primal emotional stuff is voodoo to most business men. When I ask them what they’d like me to do for them, the first thing out of their mouth is either “More profit or More sales.” They don’t realize that connecting emotionally is an important part of the solution to that problem. I’m sure you acknowledge the resistance to exploring “feelings” with business owners.

Seth Godin said in a talk earlier this year that Apple’s mission is teaching the world what is “good taste.” This claim about Apple’s “good taste” as a differentiator is mythical or bragging at best. You’ll NOT find that idea mentioned in any of Apple’s annual reports. They’re about profitability and return on investment.

Seth Godin video link >
20 minutes viewing time.

“Rebuttal” by Larry Wall, in 2011. Wall is the creator of the Python computing language:
Apple Tries to Be the Arbiter of Good Taste >
5 minutes viewing time.

But when good taste becomes mandatory, then it’s not really good taste any more—it’s just manners,” says Wall.

 

Good user experience is just good manners and proper etiquette. Politeness and hospitality (aka common sense.)