How Apple has used the decoy effect in marketing

Apple’s decoy effect in marketing is the most evident in its pricing strategies.

In marketing, the decoy effect (or attraction effect or asymmetric dominance effect) is the phenomenon whereby consumers will tend to have a specific change in preference between two options when also presented with a third option that is asymmetrically dominated.

In other words, marketers tend to introduce a 3rd product which makes it economically unwise to purchase any other product besides the product they actually want to sell so as to create the illusion that that product is much more worth buying.

So how does Apple adopt this strategy?

Taking a quick glance at this price table, when you want to double the storage capacity – going from 16GB to 32GB – you pay $70 extra and get more features, such as a 5MP iSight camera and iPod Touch Loop. Comparing these 2 products, you might sit on the fence as to buying the 16GB or the 32GB because both seem like viable choices.

However, introducing the 64GB option totally changes the ball game. Upgrading to 64GB from 32GB seems really stupid, because you will have to pay $100 more just for the extra space and no other features.

Comparing yourself paying extra $70 for double the space with extra features, to paying $100 to double your space but with absolutely zero benefit besides that, you might now more likely conclude the 32GB version is the best value for money.

Only a few would buy the 16GB version and even fewer would buy the 64GB version. The 16GB and the 64GB version act as the “price decoy” to make the 32GB version as the best option.

By the way, the iPhone 5S with 16GB is available for $199, which is $30 less than the new iPod Touch and has a lot more functionality. Fair enough to say that the iPhone comes with an additional service plan ;)