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The Decoy Effect

If I were to ask you to pick one of the subscriptions, then which one would you go for?

Chances are you are going to pick the middle one since that seems a rational choice.

However, if I were to tell you that you fell for one of the marketing gimmicks used by a lot of the companies across the world. Well, you could say the middle option looks attractive due to the presence of both print and digital for the same price, but in reality, the offer is a decoy and has been created to nudge you into selecting the same.

Here is how it works. It is called relativity. Yep, you read that right. Here is another image to explain the same to you.

Ebbinghaus illusion

If you look at the orange circle in the middle on the left and the right, you might say that the one on the left is smaller than the one on the right. However, in reality, they both are of the same size. The reason you perceive them to be different is due to the presence of relative blue circles.

In real-life scenarios, we as individuals do not know what we want to buy in the first place until we see a product to compare. That is, we do not know what sort of bike we need until and unless we have something to compare our choices to. Similarly, we do not know whether we want to buy a sedan or a hatchback until we don't compare them on a scale.In the above example , the middle option was introduced to enable the user to make comparisons and thus allow them to go for the middle option.

Here is another way to look at it. Let say you are looking for a house, and the real estate agent provides you with 3 different options. A contemporary house and two colonial houses. However, one of the colonial houses needs a roof to be repaired and the owner has decided to offer you a discount. So which house are you going to go for?

Well, the chances are you would go for the other colonial houses. And this happens because you can compare the two colonial houses which is why you see it's better to go for the one where the house does not need a repair. While the other contemporary house is not even given a thought because you do not have a contemporary house to compare it with.

The central idea is to have a comparison between two elements that enables you to make your choice.

And companies or marketing campaigns make great use of it to nudge the consumers to fall for their products. For example, Williams Sonoma introduced a bread-making machine for the household. However, the sales did not pick up, so the company decided to introduce another bread-making machine which was not only having a greater capacity but also was priced a little higher. Strange you make ask right. However, something interesting started to take place. Now the sales picked up for the initial bread-making machine. The reason was simple, now people had a decoy or a comparison between the two machines. No one would want to buy a bigger and costlier bread-making machine for his house, thus buying the original machine.

Now once you see how this decoy or relativity impacts our lives, you would also see the rationale behind the marketing offers around you and how companies try to nudge you in the direction which is profitable to them.

However, this phenomenon is not only limited to the business world. Rather it also impacts our daily lives in ways you would not have thought. Let me explain.

Let say you and your friend go to a bar to meet lovely new singles out there. Now if your friend is someone who looks likes Brad Pitt or has a personality like Batman, then even though you may be good-looking, but due to his presence girls are going to find him more attractive than you. Because now girls have a comparison to make between you and your friend. So next time when you go out, trying tagging along with someone a little less attractive than you thus increasing your chances out there. However it also means the next time a friend of yours invites you to a social party, then chances are that they consider you a little less attractive. 😜

That calls the end of our day about the decoy effect.

The ideas mentioned here have been taken from Predictably Irrational by Dan Ariely. Grab your copy now.

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