Also known as the attraction effect or the asymmetric dominance effect, this principle in marketing is built around the aim of making customers choose the option that works in favour of the seller. that involves introducing a third option into a decision which acts as the decoy.
Think of the decoy as a comparison factor for the other two options; it can be quite tricky to compare two options against each other in terms of their price, quality, convenience (etc.), so adding a third option gives the customer something to weigh up the other two options against.
An example of this would be popcorn at the cinema. Customer will be faced with three different sizes of popcorn in the form of small, medium, and large. Usually, the price differs quite a bit between small and large, so a medium option is introduced but with a price that is closer to the price of the large option. This is done to tempt people to spend that little bit extra and go large with the rationale they are getting better value for money.
If the price of the medium popcorn was closer to the small price, people may be more tempted to stick with medium, as the leap from medium to large is too big.
This concept was first demonstrated by Joel Huber in 1982 in a non-marketing context when he asked participants whether they would rather go to a 3-star restaurant that is close in distance, or a 5-star restaurant that is much further away. People had a very hard time deciding, until the “decoy” was added.
Once Joel introduced a 4-star restaurant that was even further away, people started choosing the 5-star option much more frequently. This decoy worked because the 5-star place is of higher quality and is not the furthest away in distance.
Using a decoy in marketing can be done in many ways, whether it is used in a store or online, it is an effective way to get customers to buy what you want them to buy through inter-group comparisons.