Adding a 'decoy option' may give extra boost to crowdfunding
Imagine walking into an ice cream shop and scanning your options. A sugar cone with one scoop is $3. A second scoop comes out to $4, but for just 50 cents more, you can get a large waffle cone with three scoops. Some people may not want that much ice cream. But for many, it’s hard to pass up a good deal.
Adding a third option to make something else (usually the higher priced item) more attractive is a common marketing strategy. But since the 1980s, scholars have been debating whether this attraction effect via a “decoy option” actually works in real-life settings.
Findings from a new, in-depth study bolster the argument that decoy options can shift consumer preferences. It’s also the first to test this approach in digital markets where billions of people make choices every day.
The researchers randomly assigned 4,000 participants to eight experiments based on reward-based crowdfunding campaigns, including one on Kickstarter with a real Swiss watchmaking company. Their findings, published in Information Systems Research, show the attraction effect shifted preferences from a low-priced to a high-priced reward by as much as 28%.
“That’s a significant jump that can turn an entrepreneur’s project into a reality,” said Abhay Mishra, associate professor of information systems and business analytics at Iowa State University and co-author of the study. “Our findings can help inform artists, innovators and creatives to make smarter, more effective reward menus to reach their fundraising goals.”
In reward-based crowdfunding markets, entrepreneurs set a fundraising target with a deadline for their project. Backers choose from several reward menu options, pledging a certain amount of money to receive a product or sample of the to-be-funded project. Whether the entrepreneur gets any of the funding and the backers receive their rewards depends on the project successfully reaching the fundraising goal by the set date. More
