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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 โ€œComboโ€ for 2 GB storage, $22 โ€œUnlimitedโ€ for 5GB, $27 โ€œProโ€ for 50GB, and $45 โ€œVIPโ€ for 100GB. For $5 extra, you get ten times the storage between Unlimited and Pro. Their business plans are structured similarly