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Decoy Effect

Matt Rickardโ€‹

Decoy Effectโ€‹

  • The Decoy Effect is a cognitive bias that occurs when people are presented with two options, one inferior to the other. The cheap option acts as a decoy, and people are more likely to choose the superior choice if it is presented alongside the low option
  • SaaS companies sometimes use the decoy effect for pricing plans. You can see this mostly in startups that are still targeting SMBs. Wix has programs that are 16GB"Combo"for2GBstorage,16GB "Combo" for 2 GB storage, 22 "Unlimited" for 5 GB, 27"Pro"for50GB,and27 "Pro" for 50 GB, and 45 "VIP" for 100 GB. For $5 extra, you get ten times the storage between Unlimited and Pro. Their business plans are structured similarly