Behavioural economist Dan Ariely once spotted an ad from The Economist offering three subscriptions:
- Web only: $59
- Print only: $125
- Print + web: $125
Wait. Print only and print + web cost the same? Who would ever pick print only?
Nobody. That was the point.
The experiment
Ariely put the same offer in front of 100 MIT students. 84 chose print + web. 16 chose web only. Not one picked print only.
Then he removed the useless option and asked a new group. Just two choices now: web for $59, or print + web for $125.
This time, 68 chose web only. Only 32 went for the bundle.
An option nobody wanted had more than doubled the sales of the expensive plan. It was never meant to be bought. It was meant to be compared.
Why it works
This is the decoy effect. When we can’t easily tell whether something is worth it, we look for an easy comparison. The decoy hands us one.
Next to “print only for $125”, “print + web for $125” looks like a free gift. Our brain stops asking do I even need print? and starts asking which $125 deal is better? The second question is much easier, and it has an obvious answer.
A good decoy is:
- Close to the target in price or features, so the comparison feels natural.
- Clearly worse than the target, so the target wins without effort.
- Unlike the other options, so it makes only one choice look good.
Look around
- Popcorn at the movies. Small ₹250, medium ₹420, large ₹450. The medium is there to make the large feel like a no-brainer.
- Coffee sizes. Each step up is priced so it always feels like “only a little more”.
- Software plans. A “Pro” tier sits beside “Business”, which offers three times the features for a bit more money.
The takeaway
If you’re designing prices, think about what each option is for. Some options are there to be bought. Some are there to make another one look good.
If you’re the buyer, try a simple test: cover the decoy with your thumb. Look at what’s left. Would you still choose the same thing?
The option you’d never choose can still choose for you.
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