I will try to make it as interesting as possible, with as many examples as possible. So here is the first example..
* Which of the two orange circles is bigger? Is it the right one? Let me help you, by definition decoy is a person or an object used for distraction. In this example, the blue circles are the decoy, if you remove all the blue circles you will see that both orange circles have the same size!
* And then its this example with an online advertisement (from Dan Ariely, Predictably irrational)
When consumers had two options, 68% of them chose the "economist.com" subscription and 32% the second and more expensive option. If you say that they have a thousand clients; it translated to 80120 USD.
On the other hand, when a decoy appears which in this case is the "print subscription", subscriptions on the more expensive 3rd option rise! In numbers its 114400 USD which is more than 30000 USD difference!
Sum: The middle 125 USD makes the third option look cheaper by comparison forcing many consumers to choose the option that gives the company better income.
*Look at this offer. Same operator same retailer same contract length, unlimited minutes and texts, both with 8GB of data and both phones are free with a 4G data BUT the second one is 5 pounds per month cheaper! 120 pounds in total. Is that a mistake? Or is it intended to force you to buy the second one which is a very good option for them and will give them a good revenue? Furthermore if you see the last option, same provider and retailer once again but 3GB less data with the same monthly cost. Mistake again or decoy? Who will buy the option of 5GB when he can pay the same for 8GB?
Sum: Once again we compare with similar offers, and the "Bad" options force you to choose the "good" option which is the one that the retailers want to sell the most. If you do buy the decoy option it will only give bigger profit for the firm.
* Lets say its summer and you planning for your holidays and the travel agent gives you two hotel options. Hilton hotel and Holiday inn both full board(FB) for instance. You know both are great and both have the same price.. In this case your decision to choose will be difficult. Then you have a third option(the decoy) Hilton hotel bed and breakfast(B&B) for the same price as the other two options. By nature we compare things, and since you will have a similar option to hilton hotel to compare; its more likely that you will choose the Hilton Hotel FB in front of the Hilton Hotel B&B and even holiday inn FB.(Which most probably will give to the travel agent a bigger commission!)
Conclusion
So why does the decoy influence us? (The theory)
According to all consumer behaviour gurus the consumer Decision making process has a complex process which seems like this: Problem Recognition/Need Arousal --> Information search --> Evaluation of alternatives --> Purchase decision --> Post-purchase behaviour.
The evaluation of alternatives is in the decision making process, thus it influences the purchase behaviour! A firm(and marketers) can force the sale of a particular product/service by adding a more expensive (decoy) product/service in their choices.
According to all consumer behaviour gurus the consumer Decision making process has a complex process which seems like this: Problem Recognition/Need Arousal --> Information search --> Evaluation of alternatives --> Purchase decision --> Post-purchase behaviour.
"The field of consumer behavior is, to me, the study of how our world is influenced by the action of marketers." (Solomon, Consumer Behavior -1996)
The evaluation of alternatives is in the decision making process, thus it influences the purchase behaviour! A firm(and marketers) can force the sale of a particular product/service by adding a more expensive (decoy) product/service in their choices.
Do you have any good example?
If you like the examples and the decoy effect itself, then you should read this book: Dan Ariely - Predictable irrational.
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