Don’t Fall for Decoy PricingWhen we access the value of a product, or anything else, we rely on relativity. We don’t just look at the item itself, in other words, we also compare it to other items. The problem with this tendency is that we usually focus one comparing things that are easily comparable, which allows crafty companies to employ the “ decoy effect.”
Electronic devices are often sold in tiers—multiple versions of the same essential product, but with different specs and prices. You might think that these tiers are an attempt to please different consumers with different hardware needs, but that’s not always the case. Instead, sometimes one of the offered models is a “decoy,” a version that the manufacturer knows won’t sell very much, but will drive sales of the other tiers by providing a point of comparison—making the version you choose seem like a “relatively” smart decision.
iPod Touch, ask yourself if the decoy effect might be at work. Is the middle 32GB model really the mp3 player you want? Or does it just seem like a good deal, since you’re getting four times as much storage as the lower model? And does the 64GB model actually get purchased all that much, or is it just there to make the other models seem cheap by comparison?
Understanding the decoy effect is especially relevant when it comes to new kinds of products, which the electronics industry produces on a regular basis. In “Predictably Irrational,” Airely uses the example of bread-making machines, which struggled to take off when they were first introduced. The manufacturer kick started sales of their basic model by introducing a larger, higher priced model as a “decoy.” When there was only one machine on the market, consumers had nothing to compare it to. But with a second, more expensive model on the shelf, shoppers felt more comfortable “choosing” the cheaper product.
Kindle DX. Ebook readers were a relatively new kind of product. Amazon already had their basic Kindle on the market, but like the bread maker manufacturer they chose to introduce a larger, more expensive model. Is the DX available today because it appeals to a different consumer? Or does it simply provide something to choose against, a way to make people more comfortable buying a new kind of product?
Apple and Amazon don’t release exact sales numbers on their product models, so it’s difficult to know exactly what game they’re playing. But the important thing is that you’re asking these kinds of questions when you buy your gear, and are wary of being sucked into easy comparisons.
Always Be Suspicious of “Free”Airely’s research shows that “free” is one of the most powerful, and most potentially manipulative, concepts in the world. The promise of getting something for nothing carries incredible weight in our decision making, even if it’s something we don’t really want. And worse, “free” can make us overlook better choices. In his tests with consumers, Airely found that most would take a free $10 Amazon gift card rather than buy a $20 gift card for $7—even though that means choosing a $10 gain over a $13 gain! If “free” is so strong that it persuades people into such a clearly worse choice, it’s no wonder that electronics ads employ it constantly.
HDTVs are a perfect example of this concept at work, since they frequently offer “free” 3D glasses, Bluray players or satellite TV service with purchase. The promise of getting something for nothing is such a powerful motivator, you could easily forget to shop around—causing you to miss out on better overall deals, or worse discover that the HDTV you hastily purchased doesn’t have all the features you wanted.