"How did reason come into the world? As is fitting, in an irrational manner, by accident. One will have to guess at it as at a riddle."

- Friedrich Nietzsche

The Decoy Effect - and How It Can Help You Make More Sales

By Alex Mandossian

Let's say you're trying to decide where to dine tonight - and you're in the mood for Mexican food.

Your spouse says, "I heard about a new place the other day. Supposedly, it has handmade tortillas and chiles rellenos that are to die for. The only problem is, it's about a 30-minute drive from here."

You're hungry right now. So your spouse offers another option: "There's our old standby, Don's Tex Mex. It's right down the street. But, as you know, the food's only average."

You're torn between your growling belly... and a desire for those handmade tortillas.

And then your spouse pipes up again, "I just remembered that restaurant we went to last month. Remember how good the salsa was? But... it's about 45 minutes away."

Suddenly, the 30-minute drive to the new place with the handmade tortillas doesn't seem so bad.

It happens all the time - where the introduction of a third option suddenly makes one of your earlier options look better. It sounds irrational. And it is. But it's such a common phenomenon, it even has a name. It's called the "decoy effect."

Marketers often take advantage of the decoy effect. Consider the following scenario...

You're at the movies, and you're thirsty. So you go to the concession counter to get a soda. The small size is $3.00. The large size is an outrageous $5.00. But then the person behind the counter points out that it is only 50 cents more than the medium size. Suddenly, the large size seems like a better deal.

That's the decoy effect.

In his New York Times best-seller, Predictably Irrational - The Hidden Forces That Shape Our Decisions, Dan Ariely describes an interesting study he conducted with students at MIT's Sloan School of Management. The study was based on a clever bit of "decoy-effect" pricing in an ad he found for a subscription to Economist magazine:

Offer A: Internet-only subscription for $59
Offer B: Print-only subscription for $125
Offer C: Print-and-Internet subscription for $125

"I read these offers one at a time," writes Ariely. "The first offer seemed reasonable. The second option seemed a bit expensive, but still reasonable. But then I read the third option: a print and Internet subscription for $125. I read it twice before my eye ran back to the previous options."

At this point, Ariely asked himself the same question you may have asked yourself when presented with a similar Good-Better-Best pricing model: "Who would want to choose the 'Better' option [print delivery only - Offer B] when both the 'Good' [Internet delivery only - Offer A] and 'Better' options could be purchased at the same $125 price [Offer C]?"

Good question.

In my own marketing experience, I've found that the decoy offer - Offer B in this Good-Better-Best pricing model - influences my prospects to have a strong bias toward Offer C (the "Best" option).

When Ariely presented a group of 100 MIT students with the three subscription options from the Economist ad, the same thing happened. Though some selected Offer A, most went with Offer C. None of them selected Offer B, the decoy.

So he wondered what would happen if he removed Offer B. After all, since no one had selected it, it shouldn't make any difference, right?

Not exactly...

When he presented another group of 100 MIT students with just two options - Offer A [Internet-only for $59] and Offer C [the Internet-print combo for $125], 68 of them chose Offer A and only 32 chose Offer C. Which makes the "decoy-removed" version of the ad far less profitable than the one the Economist actually ran.

I've split-tested the traditional "Good-Better-Best" model against the decoy model myself.

In the traditional model, Good = $X, Better = $Y, Best [Good + Better] = $Z.

But over and over again, the winning model looked like this: Good = $X, Better = $Y, Best [Good + Better] = $Y.

How can you use the decoy effect to make your offers stronger, more appealing, and more profitable? Start testing today.

Boost Your Kids' Brainpower With This Supplement

By Kelley Herring

Want your kid to be a star student? Feed him fish.

We've long known that omega-3s are important for developing and maintaining healthy brain tissue. Now, new research shows that docosahexaenoic acid (DHA) significantly improves cognitive function.

In the study, 175 healthy four-year-old children were randomly assigned to receive either 400 mg/day of DHA or a placebo. They were tested for various types of cognitive function before and after the supplementation.

At the end of the study, researchers found a 300 percent increase in blood levels of DHA in the supplemented group. They also found a significant association between a higher level of DHA in the blood and better performance on a test that measures listening comprehension and vocabulary. What's more, for each one percent increase in blood DHA, the percentile rank on the cognitive test improved by up to nine points.

DHA is found primarily in cold-water fish like salmon. But if your little ones are finicky about fish, you can still give them the benefits by supplementing their diets with a yummy supplement like Carlson for Kids orange-flavored DHA (100 mg), Barlean's Fresh Catch Kid's DHA (320 mg), or Nordic Naturals Children's DHA (125 mg).

It's Fun to Know: On Dasher, On Blitzen...

Reindeer - a domesticated variety of caribou - have been kept in herds for nearly 2,000 years by native peoples of the Arctic regions of Europe and Asia. They depend on the reindeer for food (sorry, Rudolph), clothing, shelter, and transportation (usually pulling, yes... sleighs).

Both caribou and reindeer thrive in extremely cold temperatures. They have a unique type of fur that traps air, providing insulation. Their diet, too, is adapted to their harsh environment. They eat mainly lichen and tough grasses, the only food available in the Arctic tundra for much of the year.

(Source: Arctic Studies Center and the National Park Service)

Word to the Wise: Apposite

Something that's "apposite" (AP-uh-zit) - from the Latin for "to set or put near" - is very appropriate and relevant.

Example (as used by Alan D. Sokal and Jean Bricmont in Fashionable Nonsense: Postmoderm Intellectuals' Abuse of Science): "Suppose, for example, that in a theoretical physics seminar we were to explain a very technical concept in quantum field theory by comparing it to the concept of aporia in Derridean literary theory. Our audience of physicists would wonder, quite reasonably, what is the goal of such a metaphor - whether or not it is apposite - apart from displaying our own erudition."

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These articles appear courtesy of Early to Rise [Issue #2543, 12-19-08], the Internet's most popular health, wealth, and success e-zine. For a complimentary subscription, visit http://www.earlytorise.com/.