How To Make Your Customers Spend More
You’re caffeine depleted, and you pop into Starbucks to refuel.
This is their menu; what are you picking:
When there are only two options, most people choose based on their preferences. And people prefer to save money, so they go small.
Let’s say 100 people order today.
80% pick small
20% pick medium
Average order value: $2.80
But the next time, they changed their menu to this:
When there are more than two options, people start to make decisions based on comparison.
Because now, the introduction of the grande forces you to make a value assessment.
And although the small and medium prices remain unchanged, it’s much easier to make a comparison between $4.00 and $4.50. And therefore, people start looking at the higher end of the menu, despite the small price remaining unchanged.
The medium here becomes the ‘decoy’ existing only to make the grande seem like a no-brainer upgrade.
How this affects the bottom line:
20% pick small
10% pick medium
70% pick large
Average order value: $4.05
A monumental increase in revenue from the same customer cohort.
This is the decoy effect which is a form of ‘nudging’ to get your to spend more.
Now you’ll start noticing it everywhere:
• Popcorn at the cinema
• Drive through menus
• Online subscriptions
Putting It Into Practice
Let’s look at a real-world landing page example:
Two options - not much to compare. Most will pick a single bottle on the basis of loss aversion (not wanting to part ways with their hard-earned money).
Now let's introduce a third:
Now we’re in comparison mode. We can’t help it - when faced with more than two options, we start to compare different attributes to make the correct decision.
In the above example, the third option makes you feel like you’re getting a killer deal.
Here’s another example:
Skinnyfit doesn’t have a clear price decoy.
Instead, they lack a one-time buy button on the single pack.
The two and three-packs are suddenly way more valuable from a convenience POV.
My point is this - there are many ways to play with the decoy effect.
BUT what works for one may not work for you - test your offer pricing regularly.
Some additional tips:
- Place a ‘per serving’ cost to display relative daily value
- Introduce a best seller, or best value tags to illustrate past buyer behavior
- Make your cheapest option more inconvenient e.g. make them pay for shipping