Imagine you’re looking to get a subscription to your favorite newspaper or magazine. Yes, you enjoy the convenience of an online subscription but you also happen to love the ritual of holding a physical copy in your hands each morning during your commute.
You go to the website and you see that there are three options: an online-only subscription for $59, a print-only subscription for $125, and an online-and-print bundle for $125.
Which would you choose?
Well, if you’re anything like students from MIT’s Sloan School of Management (some of the brightest business minds in the world), you probably liked the bundle the best, followed by the online-only option, and then - in clear last place - would be the print-only option. When presented with precisely this set of choices, 84% of MIT students chose the bundle, 16% chose the online-only option, and 0% - yes, zero - chose the print-only option.
And the reason for this preference hierarchy is pretty unsurprising, right? I mean, you look at these three options and you’re a little shocked by the third one: “Wait, so I can get the online version and the print version for the same exact price as just the print version alone?!” It seems like a steal; it actually almost seems like a mistake (one that consumers ought to take advantage up before the publication realizes).
But was it a mistake? To investigate, this time, let’s do something slightly different: let’s remove the print-only option from the choice pool. So now you have the choice between an online-only subscription for $59 or an online-and-print bundle for $125.
Which do you choose?
Once again, if you’re like students at MIT’s Sloan School of Management, you’ve experienced what is known as a preference reversal. Now, 68% of the students choose the online-only option while only 32% choose the bundle.
Okay, so what just happened?
This abrupt reversal of preferences should give you pause. Much writing in classical economics purports that preferences should be stable; that if we prefer A over B in one context, we shouldn’t suddenly prefer B over A in another. But that’s exactly what’s happening here. And what’s even more interesting is that the variable that’s driving the effect (i.e., the print-only choice) is an option that, even when it’s available, nobody even wants!
That’s because the print-only option is what’s known as a “decoy option” - it is not designed to sell, but rather to make other options (i.e., the online-and-print bundle) look better by comparison. Essentially, the goal of the print-only decoy is to make consumers think “wow, compared to the this, the bundle is a steal!”
Many of our preferences rely heavily on comparisons. We don’t choose a car without comparing it to other cars; we don’t choose a house without comparing it to other houses; heck, we don’t choose a spouse without comparing them to other potential spouses. How these things compare to one another plays a critical role in how we form preferences; the “best” one is only known after it’s been contrasted with the others. But what if “the others” change? When this happens, rather than preferences remaining stable across contexts, they can shift significantly depending on the pool of available options with which we are presented.
Consequently, as “choice architects,” we have the ability to impact decision-making based on the way we curate our choice environments.
For example, another study conducted at MIT asked students to rate the attractiveness of groups of men. Before the study, tests had been conducted to find two individuals - affectionately referred to as “Tom” and “Jerry” - who were rated to be equally-attractive by a group of independent evaluators. This means that, if given the choice between the two, there should be a 50/50 chance of Tom or Jerry being chosen as more attractive.
But the study did something interesting: it either showed students Form A below (which featured Tom, Jerry, and an “altered” - and decidedly less attractive - Jerry) or Form B below (which featured Tom, Jerry, and an “altered,” less attractive Tom).
And after showing participants one of the two forms, they simply asked “Who do you find most attractive?”
Those shown Form A overwhelmingly chose the unaltered Jerry; those shown Form B chose the unaltered Tom.
Why? It all had to do with comparisons. If I was shown Form A, I might not know whether I like Tom or Jerry better, but I damn sure know that I prefer the “normal” Jerry to the “altered” Jerry. And if I was shown Form B, I might not be sure who I prefer between Tom and Jerry, but I’m sure that I like the “normal” Tom better than the “altered” Tom.
Essentially, just like having a print-only option that was clearly inferior to the print-and-online bundle made the bundle more attractive, having a clearly inferior Tom or Jerry next to a “regular” Tom or Jerry made them seem more attractive by comparison.
Much of this has to do with the role that confidence plays in our decision-making. In a world where many choices are based on preferences, and where it’s hard to say whether your preference is “right” or “wrong,” it’s hard to be truly confident in our choices. However, having an option that is clearly inferior to another option gives us the confidence to say “Well, I’m not sure which I prefer most, but I know that this one is clearly better than that one, so I at least have a certain degree of confidence that I’m not making a bad choice.” And in this way, providing “easy” comparisons is one way in which our decision-making can be subtly influenced.
One of the keys here is to recognize the difference between “alignable” and “non-alignable” options.
Non-alignable options are options that are hard to directly compare. The saying “it’s like comparing apples and oranges” captures the essence of non-alignable options - they’re two options that differ fundamentally and thus deciding between them becomes a matter of taste as opposed to choosing “the better” option (as there is really no “better”).
But alignable options are different. They differ across metrics that are directly comparable. For example, while choosing an Apple computer versus a Samsung computer is, in many ways, a non-alignable comparison - it’s merely based on brand preference - choosing between an Apple computer with 10 hours of battery life and an Apple computer with 14 hours of battery life is more simple because these options are “alignable.”
Consequently, if we want to influence choice, it’s about creating the right “alignable” comparisons within a choice set. Basically, we want to ask ourselves:
Which option(s) do I want my clients, consumers, etc. to find most attractive?
What are the core features of this option?
How/where can I add an option which has “alignable” features that are clearly inferior to my desired choice?