Learn how to steer your potential customers towards the right package that maximises your profits while offering your clients the most value, so they become brand advocates.

What is it?

Take advantage of human psychology and make prospective customers purchase the package that offers the best value for them and yields the highest profits to your business. In this article, we introduce you to the Decoy Effect; a technique used not only used online on web applications such as Shutterstock, online publications like the Economist, or eCommerce sites like Apple. The Decoy Effect also finds application offline and is not exclusive to Digital Marketing. It has been extensively used in traditional, offline marketing. In cinemas like the Odeon where different meal packages are being offered and sold - from small, medium to large Popcorn deals.

The Hack!

We always think the grass is greener on the other side, and according to psychologists, our minds are often tricked into choosing an option that isn't in our best interest. Of course, this is the exact opposite of what we want to happen when it comes to business. If we think about the concept of "value", it is a relative concept. It varies from individual to individual, business to business and use case to use case. It is proven that a "fair" price can vary for the same product depending on the context and circumstance. So, as growth hackers, it's your responsibility to exploit this psychological loophole to maximise the value of your Software as a Service (SaaS) subscription plans. If that sounds a little confusing, read on to discover our crafty little hack that'll help you achieve this with minimal effort.

Time to Hack it!

  1. Revisit your offering and pricing structure. Instead of having two pricing plans, for example, a basic one and an advanced one, add a third plan, which we will be referring to as "decoy" plan.
  2. Hypothetically let's say your basic plan only costs £19.99 per month, and your hey-big-spender advanced plan costs the user £49.99 a month. You'll find most of your users opting for the less expensive option.
  3. By introducing a middle-weight "decoy" plan, you add a little more complexity into a customers decision-making process, and yet in a way you decide for him or her. Try offering an additional plan for £30.99 that includes access to the majority of the features included in the advanced package. The features that are not in the decoy package must be vanity features that your target segment can live without. In other words, these features are nice to have while not being deal-breakers if not in the package.
  4. This approach will encourage new users to go for a mid-tier plan as they'll now have an additional comparison point.
  5. Not convinced? Give it a try and watch your sales skyrocket. You're welcome.

The Science behind the Decoy Effect!

John Huber, John W. Payne and Chris Puto conducted a study at Duke University to see how the decoy effect impacts our everyday decision making. You can read up on the scientific explanation and how the decoy effect influences our decisions when it comes to finances and even the way we vote on HumanHow's excellent post that goes a little more into depth.