Hey there 👋 - Abhi here.
Happy Thursday to the 1523 aspiring marketers reading this newsletter.
In today's edition, we'll try something different - we're going to break down the decoy effect and understand how we can apply this psychological tactic to our work.
So, let's get right to it!
Estimated Reading Time = 2.5 minutes
Case Study: The Economist
Dan Ariely, a thought leader in psychology, shows us how the decoy effect can influence our decisions with the example of a subscription pricing page from The Economist:
Expires At Midnight
In the image above, there are three types of offerings (from right to left):
Target (Print + Web): Refers to the product the company wants to sell the most due to its higher revenue or profit margins.Â
Decoy (Print Only): An offering designed to drive more customers towards the target.
Competitor (Web Only): The offering that may take away from the target option because it's better on at least one dimension, such as price.
So how much can the decoy help? Well, in the experiment by Dan Ariely, he played out two scenarios. First, he asked 100 MIT students to choose between the offerings depicted above, and the results were as follows:
Web Only = 16%
Print Only = 0%
Print + Web = 84%
The Print Only option was chosen 0% of the time, which means we should remove it, right? Well, here's what happens when you remove the decoy:
Web Only = 68%
Print + Web = 32%
52% of users downgraded from the premium subscription!
By eliminating the "worthless" option, The Economist could have lost a whopping 30% of its revenue from subscriptions - yeah, I did the math.
And that's not all; companies like Starbucks have been able to add 262.50% in sales by implementing the decoy effect.
Want to know how you can implement this strategy, helping your business earn more revenue? Don't worry, I got you covered...
Your 3-Step Checklist
1. Pick 3 levels of your product/service
Pick lesser, and you won't be able to set up a decoy. Pick more, and you'll leave your audience overwhelmed with options.
But what if I don't have 3 levels of each product? You can always leverage bundling the way The Economist did. Group two or more products, making your most profitable bundle the target option.
2. Price the decoy closer to the target
Your decoy should be marginally better than your competitive offering but priced closer to your target.
It might feel unnatural, but the closeness in price makes them easier to compare and highlights the target's perceived value.
An amazing example from The Google Store:
3. The center stage effect
Here's how The Economist leverages the center stage effect:
Resource of the Week
A web extension that finds information about a color from any point of a website.
Before we end, I have a really important question to ask you!
I want to focus on the psychology of marketing - you can expect the same bite-sized, tactical format, but with an emphasis on psychological hacks you can leverage.
It's what I know about most and how I can provide the most value to each of you!
So, based on today's edition, would you find it more valuable if I doubled down on the psychology of marketing? |
That's all for this Thursday. 1 psychological effect & 3 tactics to get you started.
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