How To Use Psychology To Improve Your Conversion Rate

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If you’ve spent 30 sec in marketing, you’ve heard about “The Decoy Effect.” And you’ve probably seen all the examples using Starbucks’s pricing options, etc. Cool. Nothing new there. But what about all the minor details you use when leveraging the decoy effect to drive revenue? You probably haven’t seen those. So, gimme 3 mins.

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Dan Ariely gave a presentation that broke down the psychology behind The Economist’s pricing structure.

The Economist used to have three price points:

1. Online: $59

2. Print-Only: $125

3. Print & Web: $125

Looking at it, the print-only option looks pointless.

But, it’s not.

Dan Ariely led a study where he gathered 100 MIT students and presented them with two different pricing options.

He presented the first 100 students with the current pricing structure:

• 16% said they’d purchase the online-only option.

• 0% said they’d purchase the print-only option.

• 84% said they’d purchase the online and print option.

But, when Dan Ariely eliminated the middle option and presented it to another 100 students - the results changed:

So, what was the most popular option became the least desired option.

Now:

• 68% wanted the online-only option.

• 32% wanted the print & online option.

So, what seemed useless was useful in helping consumers determine what they wanted.

Because the middle option served as a decoy to make the premium purchase look like an unbeatable deal.

This is called The Decoy Effect.

But here’s how to make it even better.

Harry Molyneux asked a great question on Twitter, “Can you guess the winning test variant?”

And one of the variants is more than $20k per month more valuable than the other.

Here are the options:

The correct answer is B.

Here’s why:

• Shifting the best value offer to the right while using an eye-catching color.

• Displaying the comparison price larger than the discounted price.

• Displaying the price per day minimizes the mental cost.

So, Putting It All Together:

• Use the decoy effect to help consumers determine what they want.

• Add a middle option that makes the premium purchase seem like a great deal.

• Use a different color to make the premium purchase eye-catching.

• Make the comparison price or original price much larger than the discounted cost.

• Minimize the mental costs by adding a price per day that shrinks the cost with logic.

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