The Subscription Choice Experiment - Deepstash

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The Psychology of Free Shipping

The Subscription Choice Experiment

The famous Economist subscription study showed the following set of options:

  • Option A: Online subscription Only, $59
  • Option B: Print subscription Only, $125
  • Option C: Online and Print, $125
    Subscribers were selecting Option C a whopping 84 percent of the time, due to the dominated option B (the decoy), which cost the same as option C but offered less. With Option B removed, Option C was selected just 32 percent of the time.

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The decoy effect
The decoy effect

It happens when consumers change their preference between two options when presented with a third option, or decoy.

The decoy is priced to make one of the other options much more attra...

How decoys work

When consumers are faced with many alternatives, they often experience choice overload that increases anxiety and hinders decision-making.

Consumers try to reduce this anxiety by selecting only a couple of criteria (say price and quantity) to determine the best value for money.

A decoy steers you in a particular direction while giving you the impression that you are making a rational, informed choice.

Decoy example in the market

Consider the price of drinks at a well-known juice bar: a small (350 ml) size costs $6.10; the medium (450 ml) $7.10; and the large (610 ml) $7.50. The medium is a slightly better value than the small, and the large better still. The medium is designed to be the decoy, steering you to see the biggest drink as the best value for money.

If you buy the biggest, was it because you made a sensible choice, or have you been manipulated to opt for bigger than intended?

The Decoy Effect

It is a marketing tactic used to nudge you into purchasing a higher-priced variant of a product or service.

The Decoy effect can be applied in recruitment, polls, elections, or anywhere else ...

The extra-large glass

A well-designed decoy can shift our decision making between two options as much as 40%.

For example, we are more likely to buy the large glass of juice at the counter when we have been provided with a choice in which the smaller glass is priced only slightly less. We tend to opt for the bigger glass (even if we don't need more juice) as it looks like a bargain.

The Unattractive Option
  • The Unattractive Third Option (The Decoy) has no real value in itself and is just placed to sway the decision maker towards the higher-priced option.
  • The Decoy's only purpose is to make the expensive option appear like a bargain.
  • This has also been widely used in subscription options of magazines and in the high-end diamond market.