The Decoy Effect: How Useless Options Frame Your Decisions

You walk into the movie theater famished. You look at the prices at the concession stand.

The small popcorn is $4. The large popcorn is $8. You debate it. Expectedly, $8 feels like a lot for puffed corn. You might stick with the small. But wait. You see a third option. The medium popcorn is $7.50.

Suddenly, your math changes. You aren't comparing the small to the large anymore. You are comparing the medium to the large. For just fifty cents more, you can get a massive upgrade from medium to large. The large is no longer "expensive." It is a "great deal." You buy the large. You walk away feeling like a smart shopper, having spent exactly what the theater wanted you to spend.

This is the Decoy Effect. It occurs when people's preference for one of two options is distinctly changed by adding a third option that is "asymmetrically dominated."

Why does a third option change our perception of value?

We are terrible at evaluating absolute value. We have no internal meter that tells us how much a bucket of popcorn or a SaaS subscription is actually worth.

We can only judge value through comparison. As we discussed in Anchoring Bias, we have no internal meter for value. We need relative benchmarks. When we have two options that are vastly different—say, a cheap, low-feature plan and an expensive, high-feature plan—the comparison is hard. It requires a lot of cognitive load to weigh the pros and cons.

But when you introduce a "decoy"—an option that is clearly inferior to the "target" option but similar in price—the comparison becomes easy. The decoy serves one purpose: to make the target look superior. It collapses the complexity of the decision into a no-brainer.

How can you use this without being manipulative?

The word "decoy" sounds manipulative. And it can be. But in B2B marketing, the goal isn't to trick people into buying things they don't need. It is to help them feel confident about the purchase they were already considering.

Analysis paralysis is the enemy of conversion. When customers are faced with difficult trade-offs, they often default to doing nothing. They don't buy the cheap one or the expensive one. They leave.

The Decoy Effect clarifies the value proposition. It highlights the "smart choice."

Structuring your "Good, Better, Best"

This is why almost every SaaS pricing page has three columns. 1. The Anchor (Good): A low-priced, limited version. This kills the "it's too expensive" objection by providing an entry point. 2. The Decoy (Better??): This is the tricky middle child. Often, companies mess this up by making the middle option the "best value." That is wrong. The middle option should usually be priced uncomfortably close to the high tier, with significantly fewer features. 3. The Target (Best): This is where you want them to go. It should only be incrementally more expensive than the middle tier but offer exponentially more value.

If you look at The Economist's famous subscription page, they did this perfectly: * Digital Subscription: $59 * Print Subscription: $125 * Print + Digital Subscription: $125

The "Print Subscription" was the decoy. It cost the exact same as the bundle. It was useless. But it made the "Print + Digital" bundle look like you were getting the digital part for free. It drove massive adoption of the highest tier.

How can you use the decoy effect in B2B proposals?

You don't need a pricing page to use this. You can use it in sales proposals.

If you send a client a single proposal for $20,000, they will haggle. They will compare you to zero. They will ask, "Can we do this for $15,000?"

Instead, send three options. * Option 1 ($15,000): A bare-bones, stripped-down version. It does the job but lacks the strategic impact they want. It feels "risky." * Option 2 ($20,000): The core project. This is what you actually want to sell. * Option 3 ($22,000): The core project + rush delivery + a dedicated Slack channel + a 6-month roadmap.

Option 3 is the decoy (or a "super-target"). It is only $2,000 more than Option 2. The client looks at Option 1 and thinks, "Too risky." They look at Option 3 and think, "Wow, for only 10% more, I get VIP treatment?"

Even if they don't pick Option 3, Option 3 makes Option 2 look reasonable. Without Option 3, Option 2 was the "expensive" choice. With Option 3, Option 2 is the "sensible, middle-of-the-road" choice. And corporate buyers love being sensible.

How do you avoid the "Useless" Decoy trap?

There is a risk. If your decoy is too obviously bad, customers might see through it. They might feel patronized.

The trick is to make the decoy a legit option that just appeals to a very specific, irrational subset of people. Or, framing it as "The Legacy Plan."

For example, real estate agents do this all the time. They will show you a house that is overpriced and needs repairs (The Decoy). Then they show you a house that is slightly cheaper but in perfect condition (The Target). You fall in love with the second house immediately. If you hadn't seen the dump first, you might have nitpicked the second house. But relative to the decoy, the target is a palace.

What is the bottom line?

Pricing is not a math problem. It is a psychological one.

When you design your offering, do not just list what you have. specific options you present will change how the customer perceives the other options.

If you are struggling to sell your main product, you might not need a discount. You might just need a medium popcorn.