Relativity is something of an illusion, as how something is perceived is often highly-dependent upon the things that it is compared to in the immediate environ. We can see this visually in this illusion from www.123OpticalIllusions.com

In the diagram the inner circle on the left (surrounded by smaller circles) looks bigger than the inner circle on the right (surrounded by bigger circles). Both circles are exaclty the same size, yet the look relatively different.

Humans find it hard to judge something in isolation. A thing in isolation is difficult to assess in absolute terms. Instead, we seek to ascertain relative advantages between two or more physical objects, or experiences. Very often, people don’t have a clear idea what they want and so they need a context to assess things within. This can prove very frustrating for efficient problem-solving as very often, when you attempt to clearly define what someone wants (the deliverable) so that you can work out a solution, a design and a process for fulfilling the end result, you find that many people cannot give a precise answer. Instead, it becomes necessary to create something first, whether a rough design or a prototype, in order for the customer to decide what they like and don’t like and what they want and don’t want. With a knowledge of how people assess things relative to one another, you can more easily influence people to take the option that you prefer, as will be revealed.

Most people don’t like to think. They don’t want to define problems or desired results clearly and they don’t want to labor over the relative merits of one offering to another. You can influence them in two ways:

1. Add extra perceived value to the option that you would prefer someone to take (or remove value from the option that you don’t want taken).
2. Add a decoy

Option 1 requires adding more value, which might end up ‘costing’ you more to provide. Option 2, adding a decoy, allows you to enhance the value of another option without adding further value to it. An example given in the book is this: You have two options for a romantic weekend break, either Rome or Paris, with all flights, transfers, excursions, 4-star hotel with breakfast included. Both cities have an equal appeal and so making a decision becomes very difficult as no clear relative advantage is perceived. The decoy would be to offer an option for the Rome package without breakfast. Now there is a third option, with a clear disadvantage. In this case, with the decoy creates a relative advantage to the original Rome option. This advantage will tend to drive most people into choosing the original Rome option as it now seems much better overall. Actually, there is no great difference to the Paris option but the decoy creates a winning option. The benefit of using a decoy is that it doesn’t require extra value to be added, or to be given away.Another example given in the book is in restaurant pricing. Most people will not select the most expensive dish on a menu and will instead opt for the second most expensive. In order to take advantage of this common trait, a restaurant that has a very highly-priced dish ends up creating a decoy. It makes the second most expensive dish look relatively cheaper and, if carefully designed, that second dish can be priced higher than might otherwise be the acceptable case, thus creating extra profit margin.

Relativity can also affect the success of launching a brand new, never seen before, product into the market place. Since people cannot assess the absolute value of a totally new product, they will not be able to tell if the price is fair and reasonable or not. A way to benchmark the perceived value is to create another, much more expensive model or range. People will now have a grasp of the relative worth of the product and most people will choose the lower priced item, or the middle item between cheap, standard and expensive.

Once you understand this concept, it becomes very useful in everyday life. I recently used it on a girlfriend of mine who will never make a decision when I give her two options. Last week the same thing happened. I suggested the following, “We can go to (restaurant A) for a meal, or (restaurant B) for a meal” and I got, “Oh, you decide!” so I added, “Or we can go to (restaurant A) and just have a drink.” We ended up going to restaurant A for a meal.

Equally so, if you have a product in your business and you are finding it hard to persuade people to accept and buy at the price that you want, then try using a decoy to enhance the relative value and benefit of your main product. You can either create a higher priced product, or else offer a standard product and then a second offering of the same product, at the same price, only this time with a free gift added to it. Offer the two things at the same time, that’s crucial in order to take advantage of the relative benefit. People love ‘free’ and the relative perception of value of that offering will persuade more people to buy.

Can you think of other situations in your life where a decoy can make your life a whole lot easier, or else create more value in your life? If you can, then I’d love to know about it!

Related articles:

The Lazy Person’s Way to Instantly Looking Better