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Product Competition

Decoy Effect

Nguyen Duc Tri
Assuming there are only product A & B in the market (On the diagram, change the value of the transition "Choose C" into zero - as if Product C did not exist), there is a certain level of acceptance of product A and/or B. In this model, product B is less preferred than Product A. When Product C is introduced into the market (on the diagram, change the value of the transition "Choose C" into a positive value (Since it is a probability, the value should be within 0 & 1 range only). With this introduction, you will see that Product B is replaced almost totally by Product C. This is called "decoy effect' in marketing.
In this example, we assume that Product A is a selection priority. Product B is only considered when the customers are unhappy with Product A (with a probability). Therefore, at the initial stage, product B starts at a lower position than Product A. For that reason, product B also suffers some disadvantages as its growth is likely to be determined by the number of unhappy customers of Product A.  
By manipulating the value of the transition "Choose C" you will see that the higher it is, the more likely that Product C will surpass Product B while performance of Product A is unchanged. It implies that as the owner of Product C - and as a late comer, for instance, you just need to deal with Product B and take over its market share. 
Note that we assume the three products have no differences, except that Product A is the first consideration of the customers.  

Decoy Marketing Product Competition Consumer Psychology

  • 5 years 1 month ago