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Beware of the Decoy

When you are shopping, what goes into your purchasing decision? Most of us consider quality, of course. Price is important as well. And don't forget the decoy.

Wait, what? The decoy? A decoy is an option that is not often chosen but skews the relative attractiveness of the other choices. The Decoy Effect is an invisible mind block that can cause us to make ludicrously poor purchasing decisions.

The ridiculous middle option

This example is from the TV show, Brain Games (see Think Links below). A movie theater sells various sizes of popcorn and obviously they would like you to purchase the largest and most expensive size.

They could sell just two sizes:

Small - $3

Large - $7

Unfortunately for the theater, many people opt for the small. However, if they introduce a third size and make the value asymmetrical relative to the other sizes, something interesting happens:

Small - $3

Medium - $6.50

Large - $7

First, it is well known that when given three options, most people are naturally drawn to the middle choice (which itself is a cognitive bias). However, when they realize that the large size is only 50 cents more, often because it is pointed out by the salesperson, they see more value in that choice and go for the large.

The middle option, similar in price but clearly inferior to the big one in value, serves as a decoy to lure the consumer toward the high-end choice. Sneaky, indeed! You end up with more popcorn (and calories) than you wanted and the theater ends up with more of your hard-earned money.

Want to learn more about improving your thinking and decision making?

The high-end decoy

Another application of the decoy effect is to introduce a higher-end model of a product at a much higher price, making the already existing model more attractive. In his book Predictably Irrational, psychologist Dan Ariely discusses how when Williams-Sonoma introduced the first home bread-making machine, it was a flop.

Then the company added a second machine that was larger but cost over 50% more, and sales took off. Interestingly – people were not buying the new option. They were now buying the original model, which they had shunned before. We humans do some strange things.

The comparison shortcut

What’s going on? Why are we susceptible to this illusion? To help us make decisions faster, the lizard brain looks for context. Without a baseline or basis for comparison, it is difficult for us (as well as slow) to calculate value.

What’s a bread machine worth? If there is only one model, who knows? Value is hard to determine and not worth the hassle. But if there are two models, close in features but vastly different in price, now we can compare relative value and feel better about making a purchase.

The more similar the things being compared are, the easier it is for us to make a selection. The decoy helps make the choice with less effort.

Better decision-making

Can we mitigate the decoy effect? Yes we can, by engaging the human thinking brain – the neocortex with its big prefrontal lobe. When making a purchasing decision:

1) First determine what you really want or need before making value comparisons. What size TV is right for you? How much money do you want to spend on your vacation? Are fancy options a must-have in the car you want?

2) Only then should you look at what is available and make comparisons. Stick to your guns and do not be lured into buying something you didn’t really want or need because of “relative value.” Don’t buy the TV that is bigger than you wanted just because it appears to be a better value.

One of my goals for this blog is to help people become more aware of when their lizard brains are being purposefully targeted. By recognizing these situations and thinking through them, we can make better decisions that are more in line with our goals and values, and not based on the subconscious reaction of the lizard.

Think well and be well!

- Steve Haffner


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