I have been fooled. I am convinced.
It was about one year back when I was sourcing for a new family TV set. Off I go to one of those notorious big (presumably) discount retailers. After I mentioned that I am interested in a certain brand the friendly (aren’t they all friendly here in Singapore?) sales guy showed me three models with slightly different features. He praised the latest innovations of the high end model and how comfortable those features would make my TV-viewing experience. I did let him bask in the glory of his seemingly successful sales pitch by nodding all the way.
But then, me not stupid, I decided that the slightly lower specs model still packed with features like in built camera, voice and gesture control – but without that automatic pizza ordering service – would suffice for our purposes. Not that I don’t like pizza, it’s just that I made up that feature because I can’t even recall the difference between the most expensive and mid-range model. I simply did not want to fall for buying the high end model with the obviously fattest margins for the shop..
When I came home and switched on the new TV I was disappointed. The fancy voice and gesture control worked only as sporadically as my former “favorite” colleague at work. When gesturing to change channels or to adjust the volume I usually ended up with a stiff arm first before I reached the desired channel. Exhausting.
And after I read that those cameras on top of the TV could get easily hacked resulting in people watching me watching TV, I decided to switch off the camera function all together.
How did I end up with the medium range/priced TV when the cheapest option would have fulfilled my needs jolly well?
I have been fooled by the Decoy Effect. A phenomenon in marketing where consumers have a specific change in preference between two choices after being presented with a third choice.
Offer two sizes of soda and people may choose the smaller one; but offer a third even larger size, and people may choose what is now the medium option.
This usually works for the marketeers because we all suffer from the Extremeness Aversion. We simply are more likely to choose an option if it is an intermediate choice within a group, rather than at one extreme end.
The decoy effect is also closely related to the contrast effect.
Let’s say a company listed their bread maker for $275 and barely made any sales. They later doubled sales not by reducing the price, but by placing a similar bread maker for $429 right beside it. That $275 bread maker suddenly became a bargain.
So, a clever salesperson would offer the highest priced product straight off the bat. An initial price that’s sky-high becomes an anchor for comparison and makes everything else look reasonably priced. That’s why a $129 tie doesn’t seem much after you’ve spent over a thousand dollars on a suit.
It works beyond business. You could tell your partner you’re pregnant, followed by the dint you just put on the car.
Our brain processes information relationally but these comparisons can be warped and unprofitable. It’s helpful to think in isolation also.
Paradox of choice.
From salad dressings to computers and vehicles, we’re flooded with options. Most people celebrate that, but if you’re looking to make a sale, you’re better off giving fewer choices.
In an experiment in a supermarket only 3 percent of shoppers made purchases when presented with 24 different varieties of jam as opposed to 30 percent when six varieties were offered. Similar results were found when an employer offered 50 different mutual funds versus five for the employees to chose from to put their retirement savings in.
More options produce paralysis. The mental processing required to assess and make a decision goes into overload. Avoid decision paralysis by narrowing your options down to three.
And careful: Once you spot these marketing gimmicks do not show Reactance – the desire to do the opposite of what someone wants you to do, just in order to prove your freedom of choice – and end up buying the most expensive article on display.
Let’s make better mistakes tomorrow.
‘There are three things that are extremely hard: Steel, a Diamond and to know one’s self.’ – Benjamin Franklin
“I have always found it odd that so many people in general are worried about money and eager to get as much of it as they can, yet they give it up so easily to nonsense they buy.” – Guy P. Harrison