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Occasionally at work we get faulty products – a broken necklace chain, an un-sewn seam, a shirt could be missing its matching tie or it could just be that a previous customer’s foundation has turned a formerly white blouse a wonderful shade of carrot! – and our faulty policy is pretty standard – it gets sent back to the warehouse. However we do offer a 10% discount on faulty items on the condition that the item is then non-refundable. This is pretty standard in most clothing and shoe stores (something a small as a missing button can warrant a discount so do ask for it if you already happy to take the item!) however it is rare that we will put back out a faulty item with the reduced offer on show.

Well this got me thinking – surly we could use this discounted faulty item to our advantage. Firstly it would save a lot of staff hours sorting faulty items, and of course if we can sell a faulty item we make a profit on an item that could just be thrown away (which is also not eco-friendly!). However could this faulty item become a decoy and actually increase the sales of non-faulty items?

The decoy effect occurs when consumer’s preference between two options changes when a third, asymmetrically dominant, option is introduced. An option is asymmetrically dominant when one option is far superior to it whereas another option is superior to it in some ways but inferior in others.

Example – Imagine you want to buy some jam and, after traipsing round Tesco looking for the jam aisle, you come across 3 options.

They’re all strawberry, none of the packaging stands out and you asses the quality to be the same for each jar. However the price and quantities differ;

Jar A – 600g for 80p

Jar B – 400g for 60p

Jar C – 500g for 90p – This option is asymmetrically dominant as when it is compared to the other options you can see that with jar A you get more jam than C and it is also less money (A is the dominant jam) whereas jar B is cheaper than C but you also get less jam in jar B.

So which do you pick? Don’t tell me – A right? And you made that decision relatively quickly didn’t you? It was obvious.  Now if you just had option A and B on offer what would you pick based on the best value? It’s a lot harder isn’t it, some mental maths is involved. Jar C is an example of the decoy effect, it’s there so you pick jar A and that jar A seems like an even better deal than if you had just seen jar A and jar B on sale.

Now this decoy effect already seems to be in place in my store when it comes to jeans. We sell a confusing variety of jeans (different colours, styles, lengths etc etc). Three of our styles are ‘high waisted’ (£28), ‘enhance’ (£40) and ‘lift & shape’ (£45) all of which are designed to take one’s own assets and improve them like some form of wonderful denim wizardry! Now from my own personal opinion, and from customer’s chatting with me, it appears that the two latter options are equally magically. So what do you pick ;

–          The £28 pair with a hypothetically magic rating of 5/10

–          The £40 pair with a hypothetically magic rating of 10/10

–          The £45 pair with a hypothetically magic rating of 10/10

It seems much more logical to pick the £40 pair when presented with these 3 options than if you were just presented with the £28 and the £40 pair. Money = quality right? But here I can ‘save’ a fiver and still get high quality! Whether this decoy was intentional I don’t know, but I know the £40 jeans are selling well even though they are a relatively new style!

So far I’ve explored the decoy effect in its typical form and marketing explanation but Dan Ariely pushes it to a more psychological perspective. In one of his experiments he presented participants with pictures of 3 faces of the sex they were attracted and were asked to pick the one they felt was most attractive. Picture A was of one individual, picture B was of the same individual as picture A but had been edited to be less perfect (i.e. he photo shopped them a botched rhinoplasty) and Picture C was of a different individual to images A and B (obviously the order of pictures was controlled). Participants deliberated, they found it difficult to choose, but ultimately the majority (75%, chance would be 33%) went for Picture A, the perfect image of the face that appeared twice.

So what if instead of faultying my set of earrings that has one missing, I put them back on the jewellery rack. I place them next to a perfect set of the same earrings and next to a similar but different set. I may not even need state that they are reduced because they are faulty. I do the same with my foundation stained blouse, on the rack next to its snow white sibling and the emerald version of the same blouse. Could I increase sales of white blouses over other colours by sticking a faulty version of one next to perfect ones? Of course there are other factors to consider, if you don’t want to buy a blouse or earrings it shouldn’t have any effect but, if you do, will you pick the ‘perfect option’?

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4 thoughts on “Jam & Magic Jeans

  1. http://channel.nationalgeographic.com/channel/brain-games/videos/the-decoy-effect/

    This horrifically acted video on the national geographic, demonstrates a similar point to the one you are making. It is frustrating that we can be fooled so easily but it does feel like in comparison we are getting the better deal. Take a look at part 1: Human and Econs if you own Nudge and find the paragraph called “Anchoring”.
    We use our own reference points of what “value” is but the environment likes to challenge them and influence our decisions more than we would like to admit.

  2. Cool post!

    That video is pretty cool Dave.

    I touched on it, briefly, in my most recent blog post. People evaluate things relatively, not objectively. Ariely (2009) deemed it so important to understanding concepts like the decoy effect that he dedicated the first chapter of his book to it.

    Furnham and Boo (2011) wrote a literature review of anchoring which illustrates the importance of relativity even further. Intuitively, it makes sense as well. You use whatever information is available to you to determine the value of something and to set the reference point which you have about something – such as jam.

    Changing the context, I believe this is why stores congregate around others which are like them. I can’t imagine there is anything worse than a jewelry shop which is positioned next to Primark or Poundland. Those connotations bleed into the brands which are positioned higher.

    The context which things are presented in is just too important to ignore. From personal experience, I know that i’ve been manipulated into up-sizing even when I only wanted a small portion of something – just because it’s so cheap to do so. It feels like i’m winning (which is all to do with those magical reference points).

  3. Cheers for the replies : )
    I have one major point about the jewelry shop between pound land and Primark – guess it depends on the type of price range on the shop. I’m sure costume jewelry would still do ok, and maybe even H. Samuels as I personally don’t see that as a very expensive brand,but I’m sure Tiffany’s would suffer lost trade.

    I must admit since writing this blog and reading your comments I have become so much more aware of potential decoy effects around me. Today in Tesco I believe I spotted 3 some attempts and in the end refused to buy anything from them departments for fear of being tricked.

  4. Pingback: I got 99 problems… | Musings on the Shopfloor

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