Monday, 2 June 2014
Decoy Effect - Mapping up your Advantage
|The Decoy Effect | Select your iPhone|
What is Decoy Effect ? LEarn with an Example:-
Practical Example:One of the best known examples of the decoy effect is an old subscription page of The Economist. They offered 3 different types of subscription:
Web Subscription – $59
Print Subscription – $125
Web and Print Subscription – $125
The first offer of $59 seemed reasonable. The second option (only print) seemed a bit expensive, but still ok. But what about the third option? Both Web and Print for the same price as the print-only subscription?
Dan Ariely, an Israeli American professor of psychology and behavioral economics and author of “Predictably Irrational“, tested this phenomenon with his MIT students where he asked them to choose a subscription. The results were:
Web Subscription – $59 (16 students)
Print Subscription – $125 (0 students)
Web and Print Subscription – $125 (84 students)
Total revenue: $11,444
The majority of students selected the third option (dominating) and none of them selected the second option (the decoy). Knowing this, Ariely performed a second test and removed the decoy product. The results were:
Web Subscription – $59 (68 students)
Web and Print Subscription – $125 (32 students)
Total revenue: $8,012
This time, most of the students preferred the first subscription. By adding a decoy product. The Economist improved sales with 30%.
Check out the Decoy Effect (Brain Game) on Discovery Chanel here
Theoretically you can say :-
First of all, Decoy Effect is used in In marketing. The decoy effect is also called asymmetric dominance effect.
It is the phenomenon whereby consumers will tend to change their preference between two options when also presented with a third option that is asymmetrically dominated.
An option is said to be asymmetrically dominated when it is inferior in all respects to one option; but, in comparison to the other option, it is inferior in some respects and superior in others.
When the asymmetrically dominated option is present, a higher percentage of consumers will prefer the dominating option than when the asymmetrically dominated option is absent. The asymmetrically dominated option is therefore a decoy serving to increase preference for the dominating option.
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