Decoy Marketing


Need to sell more of a product or service? Here’s a counterintuitive idea: offer your customers a similar, but inferior, at about the same price. While it’s unlikely that they will actually buy the less attractive item, you may see a jump in sales of what you are trying to sell. That’s decoy marketing.

Here’s a real-world example. The last time I needed a can of shaving gel, I found myself staring at a shelf full of options. Gels and foamy creams, with variations like “Sensitive Skin,” “Aloe,” “Cleansing,” and many more, lined the shelves. As I stood there befuddled by the choices, I noticed a taller can of the “Advanced” gel amidst the forest of shave products. This can was identical to several other cans of “Advanced,” but was an inch or two taller and held a couple of ounces more of product. Best of all, it seemed to be the same price as the shorter cans. I studied them for another few seconds to be sure I wasn’t missing something. Nope, I wasn’t – same stuff, same package design, same price, but 20% more product. My confusion evaporated. I had no idea how shaving gel could be “Advanced,” or how that might compare with “Aloe,” but I grabbed the bigger can, rooted around and found one more in back, and headed for the checkout with both cans. How did buyer befuddlement turn into a larger-than-expected purchase so quickly? The answer: decoy marketing. In this case, the decoy was unintentional, but there are lots of ways that marketers can use the technique to steer customers toward a decision.

In the shaving gel display, the inclusion of the extra-large shaving cream can was an accident – the store just had a few left from a previous promotion. But the principle worked just fine. In this case, the regular size cans were the decoys. As soon as I spotted a nearly identical product that was clearly a better value, that new find stood out as the right choice.

“Relativity” is the key element in decoy marketing. Our brains aren’t good at judging absolute values, but they are always ready to compare values and benefits. When used proactively by marketers, a decoy product or offer can be used to make another product look like a good value. Maybe even a no-brainer, so to speak. :) In Predictably Irrational (a fascinating read for those interested in neuromarketing and neuroeconomics), author Dan Ariely describes an experiment using magazine subscription offers. Like most of Ariely’s experiments, this one is deceptively simple. Two groups of subjects saw one or the other of these offers to subscribe to The Economist.

Offer A:

$59 – Internet Only Subscription (68 chose)
$125 – Internet and Print Subscription (32 chose)

Predicted Revenue – $8,012

Offer B:

$59 – Internet Only Subscription (16 chose)
$125 – Print Only Subscription (0 chose)
$125 – Internet and Print Subscription (84 chose)

Predicted Revenue – $11,444

Take a moment to look at this rather startling result. Both offers are the same, with the exception of including the “print only” subscription in Offer A. Despite the fact that not a single person chose that unattractive offer, its impact was dramatic – 62% more subjects chose the combined print and Internet offer, and predicted revenue jumped 43%. The print-only offer was the decoy, and served to make the combined offer look like a better value. While it’s true that Ariely’s test had the subjects make the choice without actually consummating the deal with a credit card, it’s clear that introducing the decoy made the combined offer look more attractive.


How Decoys Work

According to Ariely, decoys change behavior when a subject is choosing between alternatives that are more or less equally attractive. He gives an example of choosing between a trip to Rome and a trip to Paris, both of which include free breakfasts. One might expect a slow decision making process with a more or less even split between the two alternatives. Ariely suggests that introducing a decoy, a trip to Rome with no breakfast, would make the original trip to Rome more attractive, and that given those options the trip to Rome with breakfast would handily beat the similar Paris trip.

So, jumping back to the shaving gel topic, if a drug store received a shipment of promotional cans with an extra 20% of product inside, their first reaction might be to remove the regular cans from the shelf until the promotional stock was gone. What customer would be dumb enough to buy the small can when the bigger cans were the same price? According to decoy marketing logic, however, the store would be well advised to leave a few of the small cans on the shelf with the bigger ones. As counterintuitive as it seems, the presence of some small cans so would likely boost sales of the larger promotional cans – perhaps even taking market share away from competing products that came in the larger size to begin with.

Decoys in Real Estate

It’s been a while since I’ve been home shopping, but in my experience real estate agents often set up a tour of several homes in the same price range, leaving the most desirable for last. This seems to me to be another form of decoy marketing, particularly when the next to last house is a particularly bad comparison with the one the agent hopes to sell you (e.g., the same price but in need of more repairs). Ariely suggests that this will be most effective when the comparison is between superficially similar homes, e.g., two-story colonial-style homes with the same number of bedrooms. Buying a house is a complex, risky, and expensive process, and getting a buyer to make a decision – even when he/she knows it’s necessary – can be difficult. Clever real estate agents learn that comparisons are a key part of the buyer’s process, and that selecting the right homes to visit is a key part of moving toward a decision.

Could a Decoy Help Your Sales?

I don’t advocate any techniques that push a customer into buying something he doesn’t need or want. But sometimes, customers have difficulty deciding between alternatives and, to get the product they need, require a small nudge in one direction or the other. For example, I was going to buy shaving gel in that store no matter what, but the unintentional decoy got me to the decision point and on my way more quickly than if I had I spent another few minutes considering the weighty issues of gel vs. foam, aloe vs. sensitive skin, cheaper small size vs. expensive big size, and so on.

When creating their product offerings, most companies try to come up with the best and most attractive offers they can – a practice I wholly endorse. But, sometimes adding a less attractive offer to the mix will close more deals on the better offers without disadvantaging the customer in any way. So, next time you are coming up with your “good, better, and best” packages, consider tossing in a “not so good” package that’s similar to (but not as good as) the one you’d like to drive the most traffic to. If that boosts sales of that item, you’ll know your decoy is working!

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This post was written by:

— who has written 956 posts on Neuromarketing.

Roger Dooley writes and speaks about marketing, and in particular the use of neuroscience and behavioral research to make advertising, marketing, and products better. He is the primary author at Neuromarketing, and founder of Dooley Direct LLC, a marketing consultancy. Follow him on Twitter.

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25 responses to "Decoy Marketing" — Your Turn

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Koronix 14. July 2008 at 7:59 am

When I understand it well, it’s similar as what Amazon do with the customer reviews and rates (stars). When I see a list about books I’ll prefer the more starred product as the less.

I think this idea can work.

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Colin Williams 14. July 2008 at 10:49 am

Very interesting. And good point Koronix, those little star ratings do add value to certain products. But, I wouldn’t call that decoy marketing unless Amazon INTENTIONALLY displayed lower-rated product of the same price alongside high-rated ones. Maybe they do. It certainly raises a question of whether to show Most Popular items, or One Popular item that you want to move along with less popular items of the same value.

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Colin Williams 14. July 2008 at 10:52 am

Also, I think it’s good to note that this might be easier to pull off with services and not physical products, whose decoys cost more to produce. Works well for the magazine subscription example but would be a bit more pricey to produce a bunch of decoy shaving gels that you intend NOT to sell.

Man.. this has got me thinking…

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Roger Dooley
Twitter: rogerdooley
14. July 2008 at 11:03 am

I agree about the difficulty of physical products, Colin, but sometimes creative solutions may appear. To return (once again) to the shaving gels, I’ve seen the makers do things like shrink wrap a razor or other promotional item to the can. To the extent that the promo item appeals to the buyer, it would probably have the same (or even better) effect than a larger quantity of product.

For some reason, shaving companies seems to do this kind of thing more than most – I’ve seen packages of disposable razors that contain one or two “free” blades, but also that contain some odd promo items. The strangest was a set of earbud headphones. Unrelated, perhaps, but it induced ME to buy that package vs. one that had no promo item.

Roger

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TheNerd 14. July 2008 at 11:52 am

I love this article. It reminds me to ask myself why I’m really buying an item, not just why I think I’m buying it. Sometimes I may really need the more expensive product, but sometimes I may just be seduced into the “dark side” of paying more.

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Colin Williams 14. July 2008 at 12:16 pm

I guess I should start using shaving cream or gels. I didn’t know they could make me a better designer/marketer every time I went to the store to pick some up! :)

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Roger Dooley
Twitter: rogerdooley
14. July 2008 at 1:31 pm

If you think shave gel can improve your marketing skills, Colin, wait until you get to the fragrance department!

Roger

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Daniel 14. July 2008 at 2:03 pm

By the same principle, restaurants arrange their wine lists so the wines they wish to sell the most are the in the middle to the bottom. The cheapest wine never sells well. (An example with a physical product that isn’t too expensive to implement)

I think this also illustrates that consumers make buying decisions within contexts and not in a vacuum.

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elishua 14. July 2008 at 3:04 pm

You mention that this strategy involves items which are “about the same price”. Is there a certain price differential beyond which it becomes ineffective? I suppose this would vary with circumstances, but I’d be curious to know my own threshold :)

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Roger Dooley
Twitter: rogerdooley
14. July 2008 at 4:42 pm

Elishua, I don’t know if there’s a cutoff price differential. I’d guess that in general terms the larger the difference, the smaller the impact. The Economist magazine offer worked so dramatically because the price was the same. A dollar less, and it still would probably have worked well. But a big gap wouldn’t make the combo price seem like a bargain.

Roger

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Pras Sarkar 21. July 2008 at 2:31 am

Decoy marketing can be seen at its best when you compare the various iPod offerings.

$150 – 4GB Nano
$200 – 8GB Nano
$250 – 30GB Classic

A consumers thought process usually starts with the 4GB and well, $50 more gets you double the storage amount. But $100 more will get you almost 8x more storage. There’s no doubt, 30GB is the ‘right’ choice.

You’ve gone from spending $150 to forking over $250 to Apple. Ingenious.

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Chris Cavallucci 21. July 2008 at 10:57 am

Pras shows an excellent example.

Remember that we are talking about a customer’s PERCEIVED value of a product. I feel that when we are able to manage the perception and the relative value, we have a better chance at successfully marketing the product.

Suppose that all the other brands/cans on the shelf get ‘bigger’ over time like bottles of laundry detergent in the ’90s and ’00s. What would you do to change your shaving gel to make a better value proposition?

The BBD (Bigger Better Deal) may boost sales in the near term. However, if the customer has a poor shaving experience with the BBD, the customer will be more likely to try a different product — this poor customer experience will damage the long-term, lifetime sales. The decoy marketing must be used with caution, or at least, with quality in mind.

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Roger Dooley
Twitter: rogerdooley
21. July 2008 at 11:02 am

You make a good point about all marketing, Chris – if the product fails to satisfy the customer, or if the customer experience is poor in some other way, clever marketing won’t fix that.

Roger

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Bonnie Larner 28. July 2008 at 11:08 am

There go transparency and truthiness down the drain.

bonnie

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Roger Dooley
Twitter: rogerdooley
28. July 2008 at 12:50 pm

Setting a tiered pricing structure for different product variations seems straightforward – the only gamesmanship is in picking the price points to encourage the choice you’d like consumers to make. I guess I’m not sure which part seems problematic, Bonnie.

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Vigyan Verma 30. July 2008 at 3:48 am

Truly insightful article,Roger.

Too often I have wondered if it would help FMCG brands to mention per gm pricing in addition to the usual pricing on packaging. Not sure this happens in many markets around the globe out of practice or legislation. Comparing different SKUs, not always in multiple grammages, of a brand and judging the best deal is not easy in absence of per unit pricing. I am now wondering if marketers are losing the opportunity to induce purchase of one of the SKUs by not using this approach. Of course, if your brand is a parity brand and other brands resort to the same approach it becomes a level playing field where the stronger brand, not necessarily on pricing factor alone, is likely to prevail.

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Colin Williams 3. August 2008 at 1:44 am

I just realized where I see this strategy used ALL the time: Amusement parks.

$30 for a one day pass, $50 for a two day pass, and $55 for a Season Pass. “Well, what if the kids want to come again, I certainly don’t want to pay $10 more than needed. And if we’re gonna go twice, why not get the Season Pass and leave the entire summer open?”

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Roger Dooley
Twitter: rogerdooley
4. August 2008 at 12:25 pm

That’s a great example of this strategy, Colin. And it’s a win either way for the park operator. If the visitor never comes back that season, they made a few extra bucks. And, if the season pass does produce an extra visit or two, they’ll still make plenty on concessions.

Presented with those alternatives, I’d probably go for the season pass even if I thought it unlikely I’d be back.

Roger

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John Hoff - eVentureBiz 4. August 2008 at 12:45 pm

Hello Roger. This is my first time commenting.

I loved this article. I just wrote an article on my blog about presenting value to your customers and I think decoy marketing is a prime example of this.

Correct me if I’m wrong, but essentially what you’re doing with decoy marketing is showcasing a value a product or service has over other products and/or services.

In other words, what you’re saying is: These are all good deals. But if you buy this deal, this is what else you get . . .

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Roger Dooley
Twitter: rogerdooley
4. August 2008 at 3:35 pm

Thanks for stopping by, John. I think that any effective sale transaction works for both the buyer and seller – if one side benefits far more that the other, the relationship won’t last. So, decoy pricing strategies would be best employed to encourage customers to select an option that is profitable for the seller but will also offer the customer satisfying value and performance.

Roger

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Andre Thomas 4. August 2008 at 9:45 pm

This is truly mind blowing stuff. I can implement this right away. Now that explains a lot about useless options I see out there.

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Christophe Poizat 7. August 2008 at 9:20 am

Hmmmmm…. that’s Guerrilla Marketing at its finest :-)

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Paul Pennel 23. April 2009 at 2:24 pm

Great article. No I have to figure out how to apply it to my website.

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Renee Michaels 3. February 2010 at 8:36 pm

Fab article, this is one of those “Jedi marketing” strategies. But as Chris noted, it begins with perceived value & is a strategy that can be quickly played out & lose its effectiveness.

I learned about “perceived value” in another way, many years ago at a yard sale I held. I wanted to get rid of a ton of “junk jewelry” and had priced everything under a dollar, thinking someone would scoop up bunches at once. I was soooo wrong—all day, I didn’t sell one piece.

With an hour or so to go, I did the infamous George of Seinfeld thing: do the opposite and raised the prices ridiculously. My hubby thought I was nuts—until I sold it all in under an hour.

Lesson learned: Items priced too low make the customer perceive its value as junk. People want a bargain—but they don’t want junk.

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Goran 16. July 2012 at 10:18 am

Hello.

I think decoy marketing is a great idea as well anyway I wonder why The Economist moved the “decoy” offer? Was it unsuccessful? They offer now only 2 options. Digital and Print.

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9 responses to "Decoy Marketing" — Your Turn

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