This is How one can Inform Inside 10 Seconds If You are About to Spend Extra Cash Than You Ought to
When I was a wedding photographer (because no one was supposed to be just a thing) my wife convinced me to add an extremely expensive option to our list of wedding packages.
I thought it was a waste of time as no couple would ever choose it.
It turned out I was wrong – as in countless cases involving my wife’s better judgment. Some couples have chosen this package. Even if we did not include this package in the calculation, our average sales price has increased.
Perhaps “expensive” for some is a proxy for “excellent”.
But mostly because of what Dan Ariely, Duke professor and author of books like the excellent Predictably Irrationally, calls the lure effect.
If you are unfamiliar, the lure works as follows. Several years ago, The Economist magazine offered a digital subscription for $ 59 and a print subscription for $ 125.
Then they decided to offer a third option: a combo digital and print subscription for $ 125.
When two options were available, most people opted for the digital subscription. It was cheaper.
When the third option became available, people were more than 50 percent more likely to choose the digital / print offering.
The prices haven’t changed. The only thing that changed was adding a bait.
Another use of the lure effect relates to the number of choices offered. If there are two options, more people are choosing the cheaper ones. When there are three, more people tend to choose the middle one. This is partly due to what is known as the center stage effect, a natural tendency towards anything physically in the middle.
And also because people tend not to buy the cheapest because that feels “cheap” … but also not the most expensive because that feels indulgent. Or wasteful. (Or so.)
But add a fourth option and people tend to choose the second most expensive, not the third, even though both are kind of in the middle.
Which turned out to be true in wedding photography. Significantly more people chose the second most expensive of four packages, especially when we made the most expensive package really expensive: In comparison, this package seemed like a bargain.
Admittedly, no pricing strategy can overcome poor value for money.
But if your product or service is competitive and offers real value – which ours definitely were and definitely did or we wouldn’t have had a business, let alone a successful one – then a small tweak can generate significant dividends in sales.
Especially in men: Research shows that people with higher testosterone levels (read: men) tend to make less consistent decisions and more “target” decisions (intended deception).
(Even more evidence that men really aren’t more rational than women.)
Think beyond the price
The lure effect can play a role beyond purchasing decisions. Research shows that the lure effect can influence the decision of employees between pension plans. Other research shows that the deception effect can influence healthcare decisions.
Or say you want to encourage your employees to save for retirement. If you offer two options – either to opt out or to get a match when employees set aside 5 percent of their salary – some may see 5 percent as too high a bar and decide to opt out.
However, if you offer a third option – a lower match after employees have paid 2 percent of their salary, for example – more people are likely to choose it.
And probably more people are choosing the 5 percent option, as a 5 percent match seems a lot better than 2.
Although 5 percent is much better than zero percent.
So if you want to be more persuasive and hopefully use your powers forever, then consider how to shape the options you have provided. A small change can make an option look more attractive. A small change can make an option seem less onerous.
If you add in a relatively unattractive option, you might find that what you hope is a lot more likely.
Behavioral science says so.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.