Hello there, marketing enthusiasts! It's great to have you back for the third edition of BRANDING MINDS, your source for unraveling the fascinating world of marketing strategies and tactics. I'm so excited to take you on a journey through the captivating realm of consumer behavior and psychology.

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In this edition, we're going to explore a clever technique used by marketers that nudges us towards certain choices—The Decoy Effect. This psychological phenomenon influences our decisions by introducing a third option that makes one of the other choices more appealing. Intrigued? Let's get started!

Decoding the Decoy Effect

Think about being at a movie theater and wanting to pick the right size of popcorn. You see three options: a small size, a large size, and a jumbo size. The small popcorn costs less, and the large popcorn looks like a good deal because it's bigger. But hold on! There's also a jumbo size, and it costs just a bit more than the large. Now, things get interesting. This is where the Decoy Effect comes into play.

The Decoy Effect is like a sneaky trick that companies sometimes use. They show you two choices and then add a third choice that's supposed to make one of the first two choices look really good. This third choice is like a trickster, and we call it the "decoy."

Here's what happens: When you see the jumbo popcorn as an option, it affects your thinking. Even if you might have been leaning towards the large popcorn before, the jumbo popcorn makes the large popcorn look better in comparison. It's like magic! The decoy helps steer your decision towards the choice the company wants you to make.

This kind of trick is used in many places, not just for popcorn. It's used when companies want you to pick something specific. They use the decoy to make that choice more appealing.

The Decoy Effect works because our minds like to compare things. When we see a new choice, we often compare it to the other choices we have. The decoy makes one choice seem better, even if it wasn't the best choice before.

Exemplifying the Decoy Effect:

The Economist's Strategy

Understanding the Decoy Effect becomes clearer through the lens of real-world illustrations. Consider the subscription pricing strategy of The Economist, a prime example of this psychological phenomenon. The publication presented customers with three subscription options:

1. Online subscription for $59

2. Print subscription for $125

3. Print + Online subscription for $125

Now, here's where the magic of the Decoy Effect comes into play. Why would someone choose just the print subscription when they could have both print and online access for the same price? The answer lies in the third option acting as a decoy. This crafty introduction makes the second choice - the print subscription - seem like an enhanced deal. Surprisingly, a substantial number of individuals opted for the third choice, resulting in a notable revenue increase for The Economist.

Café Coffee Day's Approach

Café Coffee Day, an Indian coffee chain, creatively harnessed the Decoy Effect to stimulate their coffee sales. Their menu offered three distinct coffee sizes at varying prices:

1. Small for Rs. 90

2. Medium for Rs. 120

3. Large for Rs. 130

Interestingly, the third option, the "Large" size, played a pivotal role as a decoy. Its presence made the medium option appear as an excellent value proposition. By positioning the medium size as a prudent upgrade from the small, Café Coffee Day nudged customers toward choosing the medium size more frequently. This strategic use of the Decoy Effect contributed to heightened sales and overall revenue for the company.

The Wall Street Journal's Strategy

Beyond the above examples, the Decoy Effect is evident in various corners of the business world. The Wall Street Journal, for instance, employed it in their digital subscription pricing. They offered two plans:

1. Basic Digital subscription for $10 per month

2. All-Access Digital subscription for $15 per month

However, the Decoy Effect came into play subtly. The addition of a third footnote that read, "Save $60/year with the All-Access subscription," drew attention to the value presented by the All-Access plan. While not a direct choice, this influence often swayed customers toward the All-Access option. This strategic use of the Decoy Effect underscores its potency in guiding consumer decisions.

Putting Psychology to Work

By understanding the Decoy Effect, marketers can guide consumers towards choices that benefit their business. When crafting your marketing strategies, consider:

• Pricing Strategy: Introduce a slightly more expensive option that makes the middle option seem like a better deal.

• Product Bundles: Combine products to make one bundle more appealing when compared to purchasing items individually.

• Menu Design: Highlight specific dishes to guide diners towards certain choices in restaurants.

Remember, the Decoy Effect is a powerful tool that can help you influence consumer choices and drive sales. However, it's essential to use it ethically and responsibly, ensuring that your customers feel satisfied with their purchases and trust your brand.

That's it for this edition of BRANDING MINDS! I hope you found this exploration of the Decoy Effect in marketing insightful and useful. As always, I'm eager to hear your thoughts and experiences on this topic, so please share your feedback and join the conversation by reaching out to me on Linkedin. Don't forget to subscribe to the newsletter if you haven't yet.

Until next time!

Siddharth