CRO is getting a lot of press at the moment and rightly so, as this can be a great way to wring a bit more cash from your hard-earned traffic
In this article, I will point you at a psychological technique that is well worth adding to the list of things to test – giving your visitors an “‘asymmetrically dominated choice’.
The effect of doing this is otherwise known as The Decoy Effect.
I have used this technique successfully in several niches to drive up the value of each sale and hence generate more commission.
What Is The Decoy Effect?
I first came across this in Dan Ariely’s excellent book “Predictably Irrational”, but I have rarely heard it talked about in the world of affiliate sites.
An asymmetrically dominated choice may sound scientific and complicated but it is actually pretty easy to understand and implement.
If you simply give people a choice of “do you want it or not?” most people will leave it, which is why it is so hard to sell stuff to people!
However, giving people options beyond a simple “do you want it or not?” changes their perception of the value and desirability. One well-known example was the Williams Sonoma Breadmaker.
Williams Sonoma, a large US homewares store, introduced a breadmaker for $275 and it barely sold. After some thinking, they decided that the audience for breadmakers was at the more affluent end of the market, so they added features and put a second, more expensive model on the market.
This new model was launched, with much fanfare, and a price of $415 and it immediately sold…pretty much nothing!
However, something strange happened. To their amazement, the cheaper model started selling.
The reason for this was that their customers now had something to anchor their perception of value on. They could choose the lower specification option for less money or the high specification for more money.
In this case, the lower price was seen as more beneficial than the additional features. As we will see in the examples below, in tests, this is, more often than not, the way people go.
So while selling more breadmakers was good news for Williams Sonoma, they were still leaving money on the table as they were not selling many of the more expensive models.
But there was something they could have done to make this more likely; add a third option.
If you add a third similar, but less attractive, option equally between the existing options, nothing much will happen. However, if you price it closer to the most expensive option, the spread of prices is unequal or asymmetric compared to the features it offers..
This simple addition is our decoy, making the most expensive option look like better value by creating the “asymmetrically dominated choice”…our Decoy Effect
Examples Of The Decoy Effect
The best example of The Decoy effect I have seen in action was demonstrated on the National Geographic Channel when they looked at how to price popcorn at the movies.
Here, they initially offered 2 sizes of popcorn – a tub at $7 and a cup at $3. The tub, while much larger than the cup, was almost universally ignored in the same way the expensive breadmaker was for Williams Sonoma.
However, when they introduced a medium for $6.50, the tub suddenly looked like a bargain and many more people bought it.
In Predictably Irrational, Dan Ariely demonstrated how much of an effect this can have through an experiment based on the way the Economist priced their offerings.
He offered potential Economist customers the following options
- Digital access for $59 per year
- Print Edition for $125 per year
- Print Edition plus Digital Access for $125 per year
In this example 16% of people chose the first option, 0% chose the middle option, and 84% chose the third option.
The second option looks totally redundant, yet when he removed it 68% of people picked the online-only option, and only 32% chose the print and web option.
So as you can see, that redundant option can make a big difference!
Using The Decoy Effect On Your Site
So, you can now see that making the expensive one looks like the better value you can increase the chances that your site’s visitor will buy that and hence increase your commission.
But what is the best way to implement it?
As pointed out in Kurt Phillip’s article on Authority Hacker comparison tables at the top of your reviews gets the most clicks and conversions. So this is also the best place to implement this strategy
Kurt suggests part of the table should tell your visitors why you have put it there eg best for sport, best for travellers, with a brief explanation why.
I specifically set up mine with these three options at the top – “best value”, “best overall” and “best money no object”
The aim here is to include one product that is lower priced, but a good option and two others that are similar but, you guessed it, one is better and more expensive. This should trigger the decoy effect and your visitors start to prefer the more expensive option.
An Affiliate Site Style Example
Let’s use an old affiliate favourite for this example – noise canceling headphones
Before I start, this example is designed to show the thought process, content and pricing, to get the decoy effect working. It is not designed to be an actual example review!
So, with that in mind, let’s say that I picked the Bose QC35 II at £289 as best overall, Sony WH1000 MX3 at £329 as best “money no object” and the Sennheiser PXC 550 at £215 as the value choice
I would then set up the top part of the comparison table to look something like this:
As you can see, the prices of the best all-rounder and the best money no object are not too far apart.
However, while the wording in the mini-description for the Bose is very complimentary, the Sony gets a few more superlatives to emphasize it’s strong points and finishes with a line unequivocally telling people that these are the very best.
These factors together should drive more people to buy the “money no object” headphones.
NB One thing to test is the order here – sometimes the “best overall” at the top works the best, while on other sites having the “money no object” first got the best results.
Additionally, these options are bounded on the low side by the value option in the shape of the Sennheisers. This option also means you can still pick up the budget conscious buyers too.
Naturally, you can add more options to your table (“best for travelers” etc) but I use these as the first three and most of the time, as it works so well!
Rule Of Thumb
I have not found any hard and fast rules for this as it varies, so I would test different products and prices to find the ones that work best for your niche.
However, as a rule of thumb, I aim to have the expensive option approximately 10%-25% more than the baseline product’s price. I then select a value option that is approximately 50%-75% of the baseline option.
For example, if my baseline option is $300 then my higher priced option would typically be between $330 and $375 and my value option between $150 and $225.
As mentioned before, you need to test this as these ratios can be all over the place and occasionally, it simply does not work!
A Variation on The Decoy Effect
As an alternative to the low, medium and top priced model, you can also use two, similarly priced options to anchor the choice, then offer a third option of both for a small additional premium.
This model is used by The Economist.to great effect in their most recent pricing strategy.
The Economist offers the print edition for £145 per year and they also offer the digital version for £145 per year. However they also offer the Print + Digital edition for £179 per year…only £34 more, a bargain, right?
Their use of asymmetric domination does not stop there. They also offer a “12 weeks for £12” offer for each of the above options. This means you can get 12 weeks of either the print, the digital or both for the same amount. For most people, it is a no-brainer to pick the “both” option.
The clever part here is that when the renewal notice comes round, since most will have chosen to have both, inertia is likely to take over and most people will continue with whatever they had ordered… usually the most expensive option!
The Economist know what they are doing!
The decoy effect is a very nice little way of driving your profits up that bit further.
Each site and niche has their own peculiarities, with some that simply defy logic. So I would advise that you test it as you would any other potential improvement, but I have increased my average commission very successfully
Let us know how you get along in the comments below….