A user test on decoy pricing: steer decisions and increase conversion
Do subjects like human behavior, mental models and cognitive science give you a kick? It does so to us at Usabilla, so we try to share some of the exciting stories we read in posts about Piaget’s theory or the Vampire Effect. Today we’d like to write about the decoy effect, an effect we saw described for the first time in one of our favourite books Predictably Irrational: The hidden forces that shape our decisions, written by Dan Ariely. The effect can shortly be described as follows:
The decoy effect (or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated.
—Decoy Effect on Wikipedia.
Did you get confused by the definition? No worries, it is much simpler than it sounds, as it plays on one of the factors humans use in decision making: relativity. We, as humans, can easily get deceived by the illusion of relativity. For instance, in the following illustration the circles in the middle are the same size, but appear bigger when placed within the smaller circles on the left, and smaller when placed within larger circles on the right (image taken by interaction-dynamics).
Dan Ariely decided to play with the notion of ‘decoy pricing’ after stumbling upon a subscription ad by the Economist. The ad consisted of three different offers:
|Print & Web subscription||$125|
I guess you’re wondering yourself: who the hell is going to select the only print subscription? Well, so did Dan Ariely. He set up a test with 100 students from MIT’s Sloan School of Management, asking them to select one of the three subscriptions:
|Print & Web subscription||$125||84|
No surprise here: the students saw greater value in the print & web subscription. Now, Ariely decided to remove the print only subscription and let another 100 students choose. This time the results were more evenly distributed:
|Print & Web subscription||$125||32|
So, what do we learn from Ariely’s small test? In the presence of a decoy price, it’s more likely to control the outcome of the decision making to the desired one.
Testing the Decoy effect with Usabilla
Quite an interesting theory, that got us excited to test it ourselves. We thought the prices of our plans as an excellent subject for testing the decoy effect. Our hypothesis was that by making the small or the large accounts less favorables (decoys), we would push participants to go for the standard accounts.
To achieve we set up three independent tests: no decoy, decoy in large account, decoy in small account. We invited 50 participants to each test. On to the results!
Decoy to small account
Decoy to large account
|No Decoy effect (baseline)||$49||$89||$139|
|Decoy to small account||$79||$89||$139|
|Decoy to large account||$49||$89||$199|
|No Decoy effect (baseline)||32%||47%||6%|
|Decoy to small account||24%||58%||5%|
|Decoy to large account||49%||38%||6%|
Take aways and discussion
Now, using the results of the ‘no-decoy’ effect as a baseline to benchmark the two other decoys, we see some very interesting results that we’d like to discuss with you under the comments thread.
As we see in the table above, the decoy to the small account increased the clicks on the standard accounts. This is something that we expected. By anchoring the price close to the standard account, we made participants think something along the lines of: “what the heck, for $10 more I can get a standard account”, pushing standard accounts indeed.
However, the decoy to the large account didn’t push standard accounts, but small accounts! In this case the price is de-anchored from the two other options, making it more like an A/B choice, Small/Standard. Another interesting point is that the percentage of people that clicked on the large account remains the same in all three cases, as random participants might not see the value of a premium account. Last, a limitation of the test that should be mentioned is that it doesn’t take into account people dropping out because of the price change.
Increase conversion rates, and decrease drop-outs by being a choice architect yourself. Influence decision making by making it easier for your users to stay on your page, and sign-up. Good luck!