The Hindu Business Line : How the decoy enables an apples-oranges comparison

A person I know is in the business of selling pre-owned cars. Sometime back, as a witness to a transaction at his shop, I realised how the business owner effectively applied behavioural psychology to selling cars. He used what psychologists call the decoy. What is it?

A couple was shopping for a pre-owned Maruti Swift. The business owner showed them one Swift and one Getz. He explained to them that the Getz was marginally expensive but had some advantages. He and I could see that the couple was confused on whether to buy a Swift or a Getz.

The equation changes

The business owner later showed them another Swift. This one came without insurance and with very old tyres. Suddenly, the equation changed. After two test drives, and more than an hour later, the couple was ready to buy Swift. What happened?

The initial decision to choose between Getz and Swift was very difficult. The couple, perhaps, saw some advantages in Swift and some in Getz. Otherwise, both the cars were not easily comparable.

The business owner’s ingenious strategy to introduce another Swift tilted the couple’s decision in favour of Swift — the car they wanted to buy in the first place. How?

A handle to compare

When a second Swift was introduced, the couple now had a handle to compare. They concluded that the one with insurance and relatively new tyres were better than the one without it. And it did not stop there.

The insurance-less Swift made the Swift with insurance look better than the Getz! Behavioural psychologists call the insurance-less Swift a decoy.

A decoy simply shows the comparable in better light, enabling easier decision. Why? We choose objects that can be easily compared and avoid ones that cannot be.

Publications use this strategy to offer subscription choices. A typical offer would contain a print-only, an Internet-only and a print-and-Internet subscription.

The pricing would be such that the print-only would act as a decoy and print-and-Internet, the preferred choice.

The business owner understood this human response to decoys. He bagged the customer.

(The author is an investment strategist.)

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