Jio burnt a lot of cash to become a market leader in the telecom space. But Airtel managed to beat Jio in its ARPU (Average Revenue Per User) game.
In retaliation, Jio has launched a range of new subscription plans. Something that it hopes will take it far ahead in the game.
But, how can new options increase the revenue per user for Jio? Why will people suddenly start paying more?
Because a lot of them will be falling for something called ‘The Decoy Effect’.
What’s the Decoy Effect?
It’s an old little marketing trick that has robbed us of our savings, several times in the past. And, the best (or worst?) part is that we never realise that we are not the ones who are making decisions, but it’s someone else who’s pulling the strings.
How?
Let’s go to the pre-pandemic era when you would go out with your loved ones to movie theatres.
And wham! You walked into a trap. That buttery aroma and the craving for dopamine takes over, and you walk deeper into the trap, over to the popcorn section(here’s how popcorn and movie theatres are a match made in heaven).
Here, they lay out multiple options in front of you.
A small, a medium, and a large.
Small looks too small in front of medium and large. The medium looks a little too expensive if you compare it with the large! Large looks about right. It looks like a good deal. For a little extra, you get so much extra popcorn!
And well, you need a carbonated drink to complement the popcorn, which again comes with multiple options. You think to yourself -
“Well, I can eat more now, and save the money that I parked for dinner 🤔”.
Uh-oh. Maybe, you’re not so smart after all. You just got tricked!
Well, why would the business let you make an easy choice? After all, you are the key to the treasure chest for them. Here’s how they tricked you.
Had there been only two options, chances are, you would have gone with the smaller one. But, by deliberately planting a ‘decoy’ or a less attractive bait, they convince you that large is the best and you should buy large. This happens because our brain evaluates by comparing different options (or anchors as they call it) instead of evaluating them independently.
Fun Fact: PVR made a cool Rs. 960 crores in sales from “Food & Beverages” in FY 2019-20.
How did Jio use the Decoy effect?
A lot of us have jam-packed weekdays and we don’t get to use our phones a lot. The daily 1GB-2GB limit goes to waste. But on weekends, when we want to binge that show on Netflix, we would have already exhausted the limit in a few hours. Oh, how we wished that we could use the surplus net of the weekdays on weekends.
With the new pack, Jio has granted the wish of an unlimited daily pack, but with a catch of total limit for the period that you buy the pack. Now, how will one evaluate so many options?
Enter, our friend, the unitary method, to present the options in a comparative way -
New plan: 0.8GB/day for 30 days at Rs. 247
Existing plan: 1.5GB/day for 30 days at Rs. 213
Existing plan: 2GB/day for 30 days at Rs. 267
Now, those who were buying the 1.5GB plan but wanted to use data more effectively will be tempted towards the new plan. But, the comparison will nudge them to take the 2GB plan by just paying Rs.20 more!
So, is this plan really a benefit to its customers or just a decoy to increase its ARPU?
This seems like a small hit on your finances. But over time, this could make a huge hole in your purse.
How to avoid it is a mystery in itself. But, let’s try to demystify it…
First, the next time you decide to make a purchase, make a habit to recall this write-up :P
Second, work on limiting your choices. This could be easy if you identify your needs and preferences ahead of time. Ask yourself, how does this benefit you and the seller? Are you loosening your purse strings to get something that you don’t necessarily need?
Lastly, don’t fall for FOMO (Fear of Missing Out). Remember that you are better off with what you have.
Now that you know the game that you’re in, we hope you come out as a winner!
Until then… read on.
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That's a very well written post, thank you so much ReadOn for such amazing insights!!